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As filed with the Securities and Exchange Commission on February 29, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALKERMES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2472830
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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64 Sidney Street
Cambridge, Massachusetts 02139
(617) 494-0171
(Address, including zip code, and telephone
number, including area code,
of registrant's principal executive offices)
Richard F. Pops, Chief Executive Officer
Alkermes, Inc.
64 Sidney Street, Cambridge, Massachusetts 02139
(617) 494-0171
(Name, address, including zip code, and telephone
number, including area code,
of agent for service)
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Copies to:
Morris Cheston, Jr., Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
(215) 665-8500
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 the Securities Act of 1933,
other than securities offered only in with dividend or interest reinvestment
plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
----------------------
If this is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering: [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum
Title of each class of Amount to be offering price aggregate Amount of
Securities to be registered registered per unit offering price registration fee
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<S> <C> <C> <C> <C>
3-3/4% Convertible Subordinated $250,000,000 100% (1)(2) $250,000,000 $66,000
Notes due 2007
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Common Stock, par value $.01 1,845,018 --(4) --(4) --(4)
per share shares(3)
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(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(i) of the Securities Act of 1933.
(2) Exclusive of accrued interest, if any.
(3) This number represents the number of shares of common stock that are
initially issuable upon conversion of the 3-3/4% Convertible
Subordinated Notes due 2007 registered hereby. For purposes of
estimating the number of shares of common stock to be included upon
conversion of the notes, Alkermes, Inc. calculated the number of shares
issuable upon conversion of the notes based on a conversion price of
$135.50 per share (equivalent to 7.38 shares of common stock for each
$1,000 principal amount of the notes). In addition, the shares set
forth in the table, pursuant to Rule 416 under the Securities Act of
1933, include an indeterminate number of shares of common stock
issuable upon conversion of the notes, as this amount may be adjusted
as a result of stock splits, stock dividends and antidilution
provisions.
(4) No additional consideration will be received for the common stock and,
therefore, no registration fee is required pursuant to Rule 457(i).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION, DATED FEBRUARY 29, 2000
ALKERMES, INC.
$250,000,000 3-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2007
1,845,018 SHARES OF COMMON STOCK
The selling securityholders named in this prospectus or in prospectus
supplements may offer and sell the notes and the common stock issued upon
conversion of the notes with this prospectus. We will not receive any of the
proceeds from sales of these securities by the selling securityholders.
The notes are convertible at any time prior to maturity into common
stock at a conversion price of $135.50 per share, subject to adjustment upon
certain events.
Interest is payable on each February 15 and August 15, beginning August
15, 2000. The notes mature on February 15, 2007. The notes are subordinated to
our senior indebtedness.
We may redeem some or all of the notes on or after February 19, 2003 at
the redemption prices listed in this prospectus, plus accrued interest. Prior to
that date, we may redeem some or all of the notes if the price of our common
stock has exceeded 200% of the conversion price for at least 20 out of the 30
consecutive trading days prior to redemption. If we redeem some or all of the
notes prior to February 15, 2001, we will also make an additional payment on the
redeemed notes. The holders may require us to repurchase the notes upon a
repurchase event in cash or, at our option, common stock, at 105% of the
principal amount of the notes, plus accrued interest.
The notes, issued in denominations of $1,000, are currently eligible
for trading on the Portal Market of the Nasdaq Stock Market. Our common stock is
traded on the Nasdaq National Market under the symbol "ALKS." On February 28,
2000 the last sale price of our common stock, as reported on the Nasdaq National
Market, was $179.50 per share.
The selling securityholders may sell their securities from time to time
on the Nasdaq National Market or otherwise. They may sell the securities at
prevailing market prices or at prices negotiated with purchasers. The selling
securityholders will be responsible for any commissions or discounts due to
brokers or dealers. The amount of those commissions or discounts cannot be known
now because they will be negotiated at the time of the sales. We will pay all
other offering expenses.
INVESTING IN THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 2000
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You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information that is different
from that contained in this prospectus. The selling securityholders are offering
to sell, and seeking offers to buy, the securities only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or any sale of the securities. In this prospectus,
references to "we," "us" and "our" refer to Alkermes, Inc. and its subsidiaries.
TABLE OF CONTENTS
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Where You Can Find More Information.........................................2
Incorporation of Information We File with the SEC...........................3
Summary.....................................................................4
Risk Factors................................................................8
Use of Proceeds............................................................22
Dividend Policy............................................................22
Ratio of Earnings to Fixed Charges.........................................22
Selected Consolidated Financial Information................................23
Description of Notes.......................................................24
Description of Capital Stock...............................................39
Transfer Agent and Registrar...............................................42
United States Federal Income Tax Considerations............................43
Selling Securityholders....................................................46
Plan of Distribution for the Resale of the Securities......................47
Legal Matters..............................................................48
Experts....................................................................48
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ALKERMES(R), PROLEASE(R), MEDISORB(R), CEREPORT(R) AND THE ALKERMES
LOGO ARE REGISTERED TRADEMARKS OF ALKERMES, INC. AIR(TM), ALBULAST(TM),
ESTROLAST(TM), RECEPTOR-MEDIATED PERMEABILIZERS(TM), RMP(TM) AND RINGCAP(TM) ARE
TRADEMARKS OF ALKERMES, INC.
NUTROPIN DEPOT(TM) IS A TRADEMARK OF GENENTECH, INC. RISPERDAL(R) IS A
REGISTERED TRADEMARK OF JOHNSON & JOHNSON.
WHERE YOU CAN FIND MORE INFORMATION
Alkermes is subject to the information and reporting requirements of
the Securities Exchange Act of 1934, under which we file periodic reports, proxy
and information statements and other information with the SEC. Copies of the
reports, proxy statements and other information may be examined without charge
at the Public Reference Section of the SEC, 450 Fifth Street, N.W. Room 1024,
Washington, D.C. 20549, and the SEC's Regional Offices located at 500 West
Madison Street, Suite 1400, Chicago, IL 60661, and 7 World Trade Center, 13th
Floor, New York, NY 10048 or on the Internet at http://www.sec.gov. Copies of
all or a portion of such materials can be obtained from the Public Reference
Section of the SEC upon payment of prescribed fees. Please call the SEC at
1-800-SEC-0330 for further information about the Public Reference Room. These
reports, proxy and information statements and other information may also be
inspected at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
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INCORPORATION OF INFORMATION WE FILE WITH THE SEC
We have "incorporated by reference" into this prospectus the information
we file with the SEC. This means that we can disclose important business,
financial and other information in this prospectus by referring you to the
documents containing this information. All information incorporated by reference
is part of this prospectus, unless and until that information is updated and
superseded by the information contained in this prospectus or any information
incorporated later. Any information that we subsequently file with the SEC that
is incorporated by reference will automatically update and supersede any
previous information that is part of this prospectus.
We incorporate by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed:
- Annual Report on Form 10-K for the fiscal year ended March 31,
1999;
- Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1999, September 30, 1999 and December 31, 1999;
- Current Reports on Form 8-K filed on April 8, 1999, April 21,
1999 and February 14, 2000, and Current Reports on Form 8-K/A
filed on April 19, 1999 and May 13, 1999; and
- Item 1 of Registration Statement on Form 8-A dated June 28,
1991, as amended by Form 8-A/A dated January 17, 1997.
Alkermes will provide without charge to each person to whom a copy of
this prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference (other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information that
this prospectus incorporates). Requests should be directed to:
Alkermes, Inc.
64 Sidney Street
Cambridge, MA 02139-4136
Attention: James M. Frates, Vice President,
Chief Financial Officer and Treasurer
Telephone: (617) 494-0171
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SUMMARY
This summary may not contain all of the information that you should consider
before investing in our securities. You should read the entire prospectus
carefully.
THE COMPANY
We are applying sophisticated drug delivery technologies and product
development and manufacturing capabilities to the development of an expanding
portfolio of pharmaceutical products. We develop product candidates in
collaboration with pharmaceutical and biotechnology company partners and for our
own account. We currently have numerous product candidates in development with
multiple collaborative partners including Genentech, Inc. ("Genentech"), Johnson
& Johnson, Janssen Pharmaceutica International ("Janssen"), Ares-Serono
International S.A. ("Ares-Serono"), Glaxo Wellcome ("Glaxo") and Eli Lilly and
Company Limited ("Eli Lilly").
Our most advanced product development programs are Nutropin Depot and
Risperdal Depot. Nutropin Depot is an injectable sustained release formulation
of Genentech's recombinant human growth hormone ("rhGH") based on our ProLease
drug delivery technology. Following the completion of clinical trials and the
scale-up, construction and validation of our Cambridge, Massachusetts
manufacturing facility, Genentech submitted a New Drug Application to the FDA in
June 1999. Nutropin Depot was granted priority review status and, on December
23, 1999, was approved for marketing in the United States for the treatment of
growth hormone deficiency in children. In addition, we began a Phase I clinical
trial of Nutropin Depot in adult patients with growth hormone deficiency in
January 2000. Risperdal Depot is an injectable sustained release formulation of
Janssen's anti-psychotic drug, Risperdal, based on our Medisorb drug delivery
technology. Following completion of Phase I and multi-center Phase II clinical
trials and the scale-up and expansion of our Wilmington, Ohio manufacturing
facility, Phase III clinical trials of Risperdal Depot began in the second
calendar quarter of 1999. In addition to our work with collaborators, we have
also used our Medisorb technology to develop products for our own account. For
example, we intend to proceed into Phase I clinical trials with an injectable
sustained release Medisorb formulation of Naltrexone, an opiate antagonist, for
the treatment of alcoholism.
Our product development programs are based on improving the medical or
commercial potential of pharmaceutical compounds through advanced drug delivery
systems. We have focused on applying the tools and science of biotechnology to
the development of drug delivery systems characterized by their value,
uniqueness and proprietary nature.
We believe that we have established a leadership position in the
development and manufacturing of pharmaceutical products based on injectable
sustained release drug delivery technologies. We have two such technologies:
ProLease, developed specifically for application to fragile protein and peptide
based drugs, and Medisorb, designed primarily for application to small molecule
drugs and stable peptides. We have scaled-up manufacturing processes for these
two technologies and designed and constructed commercial scale GMP production
facilities incorporating state-of-the-art sterile manufacturing processes.
We have also established a significant presence in the field of
pulmonary drug delivery. Our pulmonary drug delivery system, known as AIR,
offers a unique, proprietary delivery system for optimized drug delivery to the
lungs. The AIR system is useful for small molecules, proteins or peptides and
allows for both local delivery to the lungs and systemic delivery via the lungs.
The technology has a number of advantages including the use of a small,
convenient, inexpensive delivery device, the ability to deliver high doses
efficiently and the potential for sustained drug release in the lungs. We have
scaled-up key aspects of our AIR particle manufacturing to support large scale
clinical trials and have entered into an agreement with a leading manufacturer
of inhaler devices.
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On February 3, 2000, we announced a collaboration with Glaxo upon
Glaxo's exercise of its option to obtain a license to our AIR technology for use
in the development of multiple product candidates in up to four specified
respiratory disease categories. Glaxo's decision to obtain a license followed
the completion of a 12-month feasibility study between the two companies. On
February 8, 2000, we announced that we entered into an agreement with Eli Lilly
to develop an inhaled formulation of human growth hormone based on our AIR
pulmonary drug delivery system. This agreement follows the completion of a nine-
month feasibility program conducted by the two companies. We are also developing
for our own account AlbuLast, a sustained release pulmonary formulation of
albuterol sulfate, for the treatment of asthma. Phase I clinical trials have
been conducted and a Phase I/II clinical trial in asthmatic patients is
currently underway.
On February 28, 2000, we announced that our Board of Directors has
authorized a two-for-one split of our common stock and an increase in the
authorized shares of common stock from 80,000,000 to 160,000,000 shares. The
proposal to effect the stock split and the increase in the authorized shares of
common stock is contingent upon receipt of shareholder approval. The proposal
will be submitted to shareholders for approval at a special meeting to be held
on April 28, 2000, in Cambridge, Massachusetts. If the proposal is approved, the
stock split and the increase in the authorized shares of common stock will
become effective with the filing of an amendment to our charter, which is
expected to occur on April 28, 2000. If approved, each share of common stock
owned by holders of common stock on such date will become two shares of common
stock. Distribution of the additional shares is expected to occur on or about
May 12, 2000.
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SECURITIES TO BE OFFERED
We issued and sold $200 million aggregate principal amount of the notes
in February 2000 to the initial purchasers in transactions that were exempt from
the registration requirements imposed by the Securities Act of 1933. The initial
purchasers reasonably believed that the persons to whom they resold the notes
were "qualified institutional buyers" as defined in Rule 144A under the
Securities Act. The initial purchasers have an option to purchase an additional
$50 million principal amount of the notes.
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Securities offered........................... Up to $250,000,000 principal amount of 3-3/4% Convertible
Subordinated Notes due 2007.
Interest..................................... Interest is payable at the rate of 3-3/4% per year on each February
15 and August 15, beginning on August 15, 2000.
Maturity..................................... February 15, 2007.
Conversion................................... The notes are convertible at the option of the holder at any time
prior to maturity into common stock at a conversion price of
$135.50 per share, subject to adjustment upon certain events.
Provisional redemption....................... We may redeem some or all of the notes at any time prior to
February 19, 2003 if the price of our common stock has exceeded
200% of the conversion price for at least 20 out of the 30
consecutive trading days immediately prior to our delivery of a
redemption notice. If we redeem some or all of the notes prior to
February 15, 2001 we will also make an additional payment on the
redeemed notes equal to one year of interest per $1,000 note, minus
the amount of any interest we actually paid on the notes. See
"Description of Notes -- Provisional Redemption."
Optional redemption.......................... We may redeem some or all of the notes on or after February 19,
2003 at the declining redemption prices listed in this prospectus,
plus accrued and unpaid interest. See "Description of Notes --
Optional Redemption."
Repurchase at holder's option upon a
repurchase event........................... You may require us to repurchase your notes upon a repurchase event
in cash, or, at our option, in common stock, at 105% of the
principal amount of the notes, plus accrued and unpaid interest.
Ranking...................................... The notes will be subordinated to our senior indebtedness. As of
December 31, 1999, if the notes had been issued, we would have had
approximately $34.1 million of senior indebtedness outstanding.
The indenture for the notes does not limit our ability to incur
additional indebtedness, senior or otherwise.
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Use of proceeds.............................. We will not receive any of the proceeds from the sale of the
securities under this prospectus.
Trading...................................... The notes are currently eligible for trading in the Portal Market.
Our common stock is traded on the Nasdaq National Market under the
symbol "ALKS."
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FORWARD-LOOKING STATEMENTS
This prospectus and the documents that are and will be incorporated
into this prospectus contain forward-looking statements that involve risks and
uncertainties. These statements may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to our future plans, objectives, expectations and intentions
and may be identified by the use of words like "believes," "expects," "may,"
"will," "should," "seeks," "pro forma," or "anticipates," and similar
expressions.
Although we believe that our expectations are based on reasonable
assumptions within the bounds of our knowledge of our business and operations,
our business is subject to significant risks and we cannot assure you that
actual results of our development activities and our results of operations will
not differ materially from our expectations. Factors which could cause actual
results to differ from expectations include, among others: (i) our first
product, Nutropin Depot, may not produce significant revenues and, in commercial
use, may have unintended side effects, adverse reactions or incidents of misuse;
(ii) we and our collaborators may not be permitted by regulatory authorities to
undertake clinical trials for RingCap or DST or to undertake additional clinical
trials for ProLease, Cereport, Medisorb or AIR product candidates or clinical
trials could be delayed; (iii) our product candidates could be ineffective or
unsafe during clinical trials; (iv) even if clinical trials are completed and
the data is submitted to the FDA as an NDA for marketing approval and to other
health authorities as a marketing authorization application, the NDA or
marketing authorization application could fail to be accepted or could fail to
receive approval on a timely basis, if at all; (v) we could incur difficulties
or set-backs in obtaining the substantial additional funding required to
continue research and development programs and clinical trials; (vi) disputes
with collaborators, termination of collaborations or failure to negotiate
acceptable new collaborative arrangements for ProLease, Medisorb, AIR, RingCap
or DST technologies, or for Cereport, could occur; (vii) our collaborators could
elect to terminate or delay development programs; (viii) even if our product
candidates appear promising at an early stage of development, product candidates
could fail to receive necessary regulatory approvals, be difficult to
manufacture on a large scale, be uneconomical, fail to achieve market
acceptance, be precluded from commercialization by proprietary rights of third
parties or experience substantial competition in the marketplace; (ix) we may be
unable to manufacture Nutropin Depot or future products on a commercial scale;
(x) technological change in the biotechnology or pharmaceutical industries could
render our product candidates obsolete or noncompetitive; (xi) difficulties or
set-backs in obtaining or enforcing our patents and difficulties with the patent
rights of others could occur; (xii) disputes with Alkermes Clinical Partners,
L.P. over rights to Cereport and related technology could occur; and (xiii)
other factors discussed under "Risk Factors" beginning on page 8, and elsewhere
in this prospectus and documents incorporated by reference, could occur.
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RISK FACTORS
An investment in the securities offered by this prospectus involves a
high degree of risk. You should consider carefully the following risk factors in
addition to the remainder of this prospectus before making an investment
decision.
OUR DELIVERY TECHNOLOGIES MAY NOT PRODUCE SAFE, EFFICACIOUS OR COMMERCIALLY
VIABLE PRODUCTS
All of our product candidates, except Nutropin Depot, need significant
additional research and development and each of them requires FDA approval
before it can be marketed. Nutropin Depot has received FDA approval but it has
not yet been commercially launched. To be profitable, we must develop,
manufacture and market our products, either alone or by collaborating with
others. It can take several years for a product to be approved and we may not be
successful in bringing other product candidates to the market. A new drug may
appear promising at an early stage of development or after clinical trials and
never reach the market, or it may reach the market and not sell, for a variety
of reasons. The drug may:
- be shown to be ineffective or to cause harmful side effects
during preclinical testing or clinical trials;
- fail to receive regulatory approval on a timely basis or at
all;
- be hard to manufacture on a large scale;
- be uneconomical;
- not be prescribed by doctors or accepted by patients;
- fail to receive a sufficient level of reimbursement from
government or third-party payors; or
- infringe on proprietary rights of another party.
If our technology fails to generate product candidates that lead to the
successful development and commercialization of products, or if our partners
decide not to pursue one of our product candidates, our business and financial
condition will be materially adversely affected.
NUTROPIN DEPOT MAY NOT PRODUCE SIGNIFICANT REVENUES
Our first product, Nutropin Depot, was approved by the FDA on December
23, 1999 and has not yet been launched commercially. Our partner Genentech is
responsible for marketing the product, which will face significant competition
from the currently approved products that treat growth hormone deficiency. In
addition, Genentech has a number of daily injection formulations on the market,
which may affect its efforts related to Nutropin Depot. The revenues we receive
from the sale of Nutropin Depot may not be significant and depend on numerous
factors outside of our control, including Genentech's decisions on pricing and
discounting, Genentech's reliance on third-party marketing partners outside the
United States, the ability to obtain reimbursement from third-party payors, the
market size for the product and the reaction of companies that market
competitive products, as well as general market conditions. If Nutropin Depot
does not produce significant revenues our business and financial condition could
be materially adversely affected.
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AS NUTROPIN DEPOT IS USED COMMERCIALLY, UNINTENDED SIDE EFFECTS, ADVERSE
REACTIONS OR INCIDENTS OF MISUSE MAY APPEAR
Until recently, the use of Nutropin Depot has been limited to clinical
trial patients under controlled conditions and under the care of physicians. We
cannot predict whether the widespread commercial use of Nutropin Depot will
produce undesirable or unintended side effects that have not been evident in our
clinical trials to date. Additionally, incidents of product misuse may occur.
These events, among others, could result in additional regulatory controls.
CLINICAL TRIALS FOR OUR PRODUCT CANDIDATES ARE EXPENSIVE AND THEIR OUTCOME IS
UNCERTAIN
Conducting clinical trials is a lengthy, time-consuming and expensive
process. Before obtaining regulatory approvals for the commercial sale of any
products, we or our partners must demonstrate through preclinical testing and
clinical trials that our product candidates are safe and effective for use in
humans. We have incurred and will continue to incur substantial expense for, and
devote a significant amount of time to, preclinical testing and clinical trials.
Historically, the results from preclinical testing and early clinical
trials have often not predicted results of later clinical trials. A number of
new drugs have shown promising results in clinical trials, but subsequently
failed to establish sufficient safety and efficacy data to obtain necessary
regulatory approvals. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations, which may delay, limit or prevent
regulatory approval. In addition, regulatory delays or rejections may be
encountered as a result of many factors, including changes in regulatory policy
during the period of product development.
Clinical trials conducted by us, by our collaborators or by third
parties on our behalf may not demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals for our product candidates. Regulatory
authorities may not permit us to undertake any additional clinical trials for
our product candidates.
Clinical trials of each of our product candidates involve a drug
delivery technology and a drug, either as a single formulation or, as in the
case of Cereport, as two products administered in conjunction with each other.
This makes testing more complex because the outcome of the trials depends on the
performance of our technology in combination with a drug.
We have other product candidates in preclinical development. We have
not submitted investigational new drug applications or begun clinical trials for
these product candidates. Our preclinical and clinical development efforts may
not be successfully completed. We may not file further investigational new drug
applications. We or our collaborators may not begin clinical trials as planned.
Completion of clinical trials may take several years or more. The
length of time can vary substantially with the type, complexity, novelty and
intended use of the product candidate. Our commencement and rate of completion
of clinical trials may be delayed by many factors, including:
- our inability to recruit patients at the expected rate;
- the failure of clinical trials to demonstrate a product
candidate's efficacy;
- our inability to follow patients adequately after treatment;
- our inability to predict unforeseen safety issues;
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- our inability to manufacture sufficient quantities of
materials used for clinical trials; and
- the potential for unforeseen governmental or regulatory
delays.
If a product candidate fails to demonstrate safety and efficacy in
clinical trials, this failure may delay development of other product candidates
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of these failures, we may also be unable to find additional
collaborators or to obtain additional financing. Our business and financial
condition may be materially adversely affected by any delays in, or termination
of, our clinical trials.
THE FDA MAY NOT APPROVE OUR PRODUCT CANDIDATES
Approval from the FDA is required to manufacture and market
pharmaceutical products in the United States. Other countries have similar
requirements. The process that pharmaceutical products must undergo to get this
approval is extensive and includes preclinical testing and clinical trials to
demonstrate safety and efficacy and a review of the manufacturing process to
ensure compliance with good manufacturing practices ("GMP"). This process can
last many years and be very costly and still be unsuccessful. FDA approval can
be delayed, limited or not granted at all for many reasons, including:
- a product candidate may not be safe or effective;
- data from preclinical testing and clinical trials can be
interpreted by FDA officials in different ways than we
interpret it;
- the FDA might not approve our manufacturing processes or
facilities;
- the FDA may change its approval policies or adopt new
regulations; and
- a product candidate may not be approved for all the
indications we requested.
The process of getting approvals in foreign countries is subject to delay and
failure for similar reasons. Any delay in, or failure to receive, approval will
have a material adverse effect on our business and financial condition.
Most of our product candidates are drug delivery systems combined with
a drug in a single formulation to treat a specific condition. In most cases, the
FDA has already approved the drug used in these product candidates for treating
the condition targeted by the product candidate. Cereport is a separate
formulation from the drug it is intended to be used with but must be tested with
that drug. We are conducting clinical trials on Cereport with carboplatin, which
is a chemotherapeutic agent, in patients with certain types of brain tumor. If
the FDA approves Cereport based on these trials, the approval will be for
Cereport's use in conjunction with carboplatin for the treatment of that type of
brain tumor. Unlike the drugs used with many of our product candidates, the FDA
has not approved carboplatin for treating the type of tumor that we are
targeting, and this could result in the FDA requiring additional clinical
trials. However, the FDA has approved carboplatin for the treatment of other
types of cancerous tumors. Any delay in the approval process for any of our
product candidates will result in increased costs that could materially and
adversely affect our business and financial condition.
Regulatory approval of a product candidate is limited to specific
therapeutic uses for which the product has demonstrated safety and efficacy in
clinical testing. Approval of a product candidate could also be contingent on
post-marketing studies. In addition, any marketed drug and its manufacturer
continue to be subject to strict regulation after approval. Any unforeseen
problems with an approved drug
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or any violation of regulations could result in restrictions on the drug,
including its withdrawal from the market.
WE ANTICIPATE WE WILL INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE
We have had net operating losses since being founded in 1987. At
December 31, 1999, our accumulated deficit was $227.7 million. These losses
principally consist of the costs of research and development, the costs of
acquiring rights to research and development performed by others and general and
administrative expenses. The majority of revenues that we have received have
come from collaboration and development agreements, research grants and interest
income. We expect to incur substantial additional expenses over the next several
years as our research and development activities, including clinical trials,
accelerate and as we begin to manufacture Nutropin Depot or other future
products for commercial sale. Because we do not expect to generate significant
revenues from the sale of products, if any, for several years, we anticipate
that additional expenses will result in losses.
Our future profitability depends, in part, on:
- obtaining regulatory approval for additional product
candidates;
- entering into agreements to develop and commercialize
products;
- developing the capacity to manufacture and market products or
entering into agreements with others to do so;
- market acceptance of our products;
- the ability to obtain additional research and development
funding from collaborative partners; and
- the ability to achieve certain product development milestones.
We may not achieve any or all of these goals and, thus, cannot provide
assurances that we will ever achieve significant revenues or profits. Even if we
do receive regulatory approval for additional products, we may not achieve
significant commercial success.
Our recently completed manufacturing facilities in Cambridge,
Massachusetts and Wilmington, Ohio require specialized personnel and are
expensive to operate and maintain. Any delay in the market launch of Nutropin
Depot or the approval of future product candidates to be manufactured in these
facilities will require us to continue to operate these expensive facilities and
retain the specialized personnel, which may increase our expected losses.
WE NEED TO SPEND SUBSTANTIAL FUNDS TO BECOME PROFITABLE
We believe that our liquid assets, anticipated funding from our
collaborators and interest income will satisfy our capital and operating
requirements for at least the next 18 months, but we cannot guarantee that this
will be the case. We will need to spend substantial amounts of money before we
can be profitable, if ever. The amount we will spend, and when we will spend it,
will depend, in part, on:
- how our research and development programs, including clinical
trials, progress;
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- how much time and expense will be required to receive FDA
approval for our product candidates;
- the cost of building, operating and maintaining manufacturing
facilities;
- how many product candidates we pursue;
- how much time and money we need to prosecute and enforce
patent rights;
- how competing technological and market developments affect our
product candidates;
- the cost of possible acquisitions of drug delivery
technologies, compounds or companies;
- the cost of obtaining licenses to use technology owned by
others; and
- whether and how we choose to exercise our option to purchase
the limited partnership interests in Clinical Partners.
If we require additional funds to complete any of our programs, we may
seek funds through arrangements with collaborators, by issuing securities or
through debt financing. If we can only raise additional funds on terms that are
not favorable to us, we may have to cut back significantly on one or more of our
programs, give up some of our rights to our technologies or product candidates
or agree to reduced royalty rates from collaborators.
WE RELY HEAVILY ON COLLABORATORS
Our arrangements with collaborators and licensors are critical to our
success in bringing our product candidates to the market. In some cases, we
depend on these parties to conduct preclinical testing and clinical trials and
to provide funding for our development programs. Some of our collaborators can
terminate their agreements with us for no reason and on limited notice. We
cannot guarantee that any of these relationships will continue. Failure to make
or maintain these arrangements or a delay in a collaborator's performance may
materially adversely affect our business and financial condition.
We cannot control our collaborators' performance or the resources they
devote to our programs. If a collaborator fails to perform, the research,
development or commercialization program on which it is working will be delayed.
If this happens, we may have to use funds, personnel, laboratories and other
resources that we have not budgeted, and we may not be able to continue the
program. The failure of a collaborator to perform or a loss of a collaborator
may materially adversely affect our business and financial condition.
Disputes may arise between us and a collaborator and may involve the
issue of which of us owns the technology that is developed during a
collaboration. Such a dispute could delay the program on which the collaborator
or we are working. It could also result in expensive arbitration or litigation,
which may not be resolved in our favor.
A collaborator may choose to use its own or other technology to develop
a way to deliver its drug and withdraw its support of our product candidate.
Our collaborators could merge with or be acquired by another company or
experience financial or other setbacks unrelated to our collaboration that
could, nevertheless, adversely affect us.
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None of our drug delivery systems can be commercialized as stand-alone
products but must be combined with a drug. To develop any new product candidate
using one of these drug delivery systems, we must obtain the drug from another
party. We cannot assure you that we will be able to obtain any such drugs on
reasonable terms.
In January 2000, Glaxo exercised its option to obtain a license to our
AIR technology for use in the development of multiple products in up to four
respiratory disease categories. The companies are negotiating the definitive
license agreement, but we cannot assure you that we and Glaxo will sign a
definitive agreement.
OUR MANUFACTURING EXPERIENCE IS LIMITED AND WE HAVE NO EXPERIENCE MANUFACTURING
COMMERCIAL PRODUCTS
We currently manufacture each of our product candidates, except for
Cereport. The manufacture of drugs for clinical trials and for commercial sale
is subject to regulation by the FDA under current GMP regulations and by other
regulators under other laws and regulations. We have manufactured product
candidates for use in clinical trials but we do not have experience
manufacturing commercial products. We cannot assure you that we can successfully
manufacture Nutropin Depot or other future products in sufficient quantities for
commercial sale, or in a timely or economical manner.
In October 1998, we completed construction of a new commercial
manufacturing plant for Nutropin Depot and future ProLease product candidates.
In June 1998, we completed an expansion of our existing Medisorb manufacturing
facility. The only manufacturing facility that the FDA has inspected and
approved is for the manufacture of Nutropin Depot. We cannot guarantee that the
FDA will approve any of our other facilities or, once they are approved, that we
will remain in compliance with current GMP.
We rely on an unrelated party to manufacture Cereport for use in
clinical trials. We expect to rely on the same party to manufacture Cereport for
commercial sale if Cereport receives FDA approval. If we are unable to do so, or
the manufacturer fails to perform as required, we may be unable to secure an
alternative manufacturer on reasonable terms or in a timely manner.
If more of our product candidates progress to late stage development,
we will incur significant expenses in the expansion or construction of
manufacturing facilities and increases in personnel in order to manufacture
product candidates. The development of commercial scale manufacturing processes
is complex and expensive. We cannot assure you that we will be able to develop
this manufacturing capability in a timely way or at all.
If we fail to develop manufacturing capacity and experience, fail to
continue to contract for manufacturing on acceptable terms, or fail to
manufacture our product candidates economically at a commercial scale, our
development programs will be materially adversely affected. This may result in
delays in receiving FDA approval for one or more of our product candidates or
delays in the commercial production of a product that has already been approved.
Any such delays could materially adversely affect our business and financial
condition.
WE MAY NOT BE SUCCESSFUL IN THE DEVELOPMENT OF PRODUCTS FOR OUR OWN ACCOUNT
In addition to our development work with collaborators, we are
developing proprietary product candidates for our own account and applying our
drug delivery technologies to off patent drugs. Because of the lack of external
funding for such development programs there is a risk that we may not be able to
continue to fund all such programs to completion or to provide the support
necessary to perform the
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clinical trials, obtain regulatory approvals or market any approved products on
a worldwide basis. We expect the development of products for our own account to
consume more resources than our programs with collaborators.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATIONS AND WE MAY NOT BE ABLE TO
OBTAIN REGULATORY APPROVALS
Our product candidates are subject to extensive and rigorous domestic
government regulation. The FDA regulates, among other things, the development,
testing, manufacture, safety, efficacy, record-keeping, labeling, storage,
approval, advertising, promotion, sale and distribution of biopharmaceutical
products. If our products are marketed abroad, they will also be subject to
extensive regulation by foreign governments. Certain material changes to an
approved product, such as manufacturing changes or additional labeling claims,
are subject to further FDA review and approval. Any required approvals, once
obtained, may be withdrawn. Further, if we fail to comply with FDA and other
regulatory requirements at any stage during the regulatory process, we may be
subject to sanctions, including:
- delays, warning letters and fines;
- product recalls or seizures and injunctions on sales;
- refusal of the FDA to review pending market approval
applications or supplements to approval applications;
- total or partial suspension of production;
- withdrawals of previously approved marketing applications; and
- civil penalties and criminal prosecutions.
We are also subject to federal, state and local government regulation
in the conduct of our business, including regulations on employee safety and our
handling and disposal of hazardous and radioactive materials. Any new regulation
or change to an existing regulation could require us to implement costly capital
or operating improvements for which we have not budgeted. We cannot assure you
that these regulations will remain the same or that we will maintain compliance
with these regulations.
We and our contract manufacturer of Cereport also are required to
comply with the FDA current GMP regulations. Current GMP regulations include
requirements relating to quality control, quality assurance and maintenance of
records and documentation. Manufacturing facilities are subject to inspection by
the FDA and must be approved before we can use them in commercial manufacturing
of our products. We or our contract manufacturer may be unable to comply with
the applicable current GMP requirements and other FDA regulatory requirements.
If we or our contract manufacturer fail to comply, our business and financial
condition will be materially adversely affected.
WE HAVE ONLY LIMITED RIGHTS TO CEREPORT
We transferred to Alkermes Clinical Partners, L.P. ("Clinical
Partners") substantially all of our rights to certain technology that includes
Cereport and then entered into an agreement with Clinical Partners under which
we perform research and development of Cereport. Clinical Partners issued
securities and used the proceeds from the sale of those securities to fund our
research and development of Cereport. Funding provided by Clinical Partners was
insufficient to complete clinical trials and apply for
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FDA approval. Since June 1996, we have used our own funds to develop Cereport.
So long as we continue this funding, we have an option to purchase the limited
partnership interests in Clinical Partners for cash or our common stock. If this
purchase option terminates, we will have no rights to Cereport or the related
technology in the United States or Canada.
If we exercise this purchase option, we must make a substantial cash
payment or issue a large number of shares of common stock. The exercise of the
option may require us to record significant charges to earnings for the purchase
of in-process research and development. If we acquire rights to the Cereport
technology under the option, we will still be obliged to pay royalties to the
limited partners.
COMPETITION IN THE BIOTECHNOLOGY INDUSTRY
We can provide no assurance that we will be able to compete
successfully against the competitive forces discussed below in developing,
marketing or selling our products.
We face intense competition
We face intense competition from academic institutions, government
agencies, research institutions and biotechnology and pharmaceutical companies,
including other drug delivery companies. Some of these competitors are also our
collaborators. These competitors are working to develop and market other drug
delivery systems, vaccines and other methods of preventing or reducing disease,
and new small-molecule and other classes of drugs that can be used without a
drug delivery system.
There are other companies developing sustained release drug delivery
systems, pulmonary delivery systems and oral delivery systems. In addition, we
know of new chemical entities that are being developed that, if successful,
could compete against our product candidates. These chemical entities are being
designed to work differently than our product candidates and may turn out to be
safer or to work better than our product candidates. Among the many experimental
therapies being tested in the United States and Europe, there may be some that
we do not now know of that may compete with our drug delivery systems or product
candidates. Our collaborators could choose a competing drug delivery system to
use with their drugs instead of one of our drug delivery systems.
Many of our competitors have much greater capital resources,
manufacturing and marketing experience, research and development resources and
production facilities than we do. Many of them also have much more experience
than we do in preclinical testing and clinical trials of new drugs and in
obtaining FDA and foreign approvals. In addition, they may succeed in obtaining
patents that would make it difficult or impossible for us to compete with their
products.
Rapid technological change could render our drug delivery systems obsolete or
noncompetitive
Major technological changes can happen quickly in the biotechnology and
pharmaceutical industries; and the development by competitors of technologically
improved or different products may make our product candidates obsolete or
noncompetitive.
The competitive nature of our industry could adversely affect market acceptance
of our products
Our product candidates may not gain market acceptance among physicians,
patients, healthcare payors and the medical community. The degree of market
acceptance of any product candidates that we develop will depend on a number of
factors, including:
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- demonstration of their clinical efficacy and safety;
- their cost-effectiveness;
- their potential advantage over alternative treatment methods;
- the marketing and distribution support they receive; and
- reimbursement policies of government and third-party payors.
Our product candidates, if successfully developed, will compete with a
number of drugs and therapies currently manufactured and marketed by major
pharmaceutical and other biotechnology companies. Our products may also compete
with new products currently under development by others or with products which
may cost less than our products. Physicians, patients, third-party payors and
the medical community may not accept or utilize our products. If our products do
not achieve significant market acceptance, our business and financial condition
will be materially adversely affected.
PATENT PROTECTION FOR OUR PRODUCTS IS IMPORTANT AND UNCERTAIN
The following factors are important to our success:
- receiving patent protection for our product candidates and
those of our collaborators;
- maintaining our trade secrets;
- not infringing on the proprietary rights of others; and
- preventing others from infringing our proprietary rights.
We will be able to protect our proprietary rights from unauthorized use
by third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
We know of several U.S. patents issued to other parties that relate to
our product candidates. One of those parties has asked us to compare our
Medisorb technology to that party's patented technology. The manufacture, use,
offer for sale, sale or importing of these product candidates might infringe on
the claims of these patents. A party might file an infringement action against
us. Our cost of defending such an action is likely to be high and we might not
receive a favorable ruling.
We also know of patent applications filed by other parties in the
United States and various foreign countries that may relate to some of our
product candidates if issued in their present form. If patents are issued to any
of these applicants, we may not be able to manufacture, use, offer for sale, or
sell some of our product candidates without first getting a license from the
patent holder. The patent holder may not grant us a license on reasonable terms
or it may refuse to grant us a license at all. This could delay or prevent us
from developing, manufacturing or selling those of our product candidates that
would require the license.
We try to protect our proprietary position by filing United States and
foreign patent applications related to our proprietary technology, inventions
and improvements that are important to the development of our business. Because
the patent position of biopharmaceutical companies involves complex legal and
factual questions, enforceability of patents cannot be predicted with certainty.
Patents, if issued, may be
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challenged, invalidated or circumvented. Thus, any patents that we own or
license from others may not provide any protection against competitors. Our
pending patent applications, those we may file in the future, or those we may
license from third parties, may not result in patents being issued. And, if
issued, they may not provide us with proprietary protection or competitive
advantages against competitors with similar technology. Furthermore, others may
independently develop similar technologies or duplicate any technology that we
have developed. The laws of certain foreign countries do not protect our
intellectual property rights to the same extent as do the laws of the United
States.
We also rely on trade secrets, know-how and technology, which are not
protected by patents, to maintain our competitive position. We try to protect
this information by entering into confidentiality agreements with parties that
have access to it, such as our corporate partners, collaborators, employees and
consultants. Any of these parties may breach the agreements and disclose our
confidential information or our competitors might learn of the information in
some other way. If any trade secret, know-how or other technology not protected
by a patent were to be disclosed to or independently developed by a competitor,
our business and financial condition could be materially adversely affected.
EFFORTS TO KEEP DOWN THE COST OF HEALTHCARE MAY THREATEN OUR PROFITABILITY
Third-party payors, which include governments and private health
insurers, are increasingly challenging the prices charged for medical products
and services. In their attempts to reduce healthcare costs, they have also been
limiting their coverage and reimbursement levels for new drugs. In some cases,
they are refusing to cover the costs of drugs that are not new but are being
used for newly approved purposes. Patients who use a product that we may develop
might not be reimbursed for its cost. If third-party payors do not provide
adequate coverage and reimbursement for our products, if and when they reach the
market, doctors may not prescribe them or patients may not use them.
The federal government and various state governments have considered
proposals to regulate the prices of prescription drugs, as is done in certain
foreign countries. We expect that there will be more proposals like these. If
any of these proposals are enacted, we may receive a lower price for our
products, if and when they reach the market, than we currently estimate. Lack of
adequate reimbursement or the enactment of price controls would have a material
adverse effect on our business and financial condition.
WE HAVE NO MARKETING OR SALES EXPERIENCE
We currently have no experience in marketing or selling pharmaceutical
products. To achieve commercial success for any product that may be approved by
the FDA, particularly products developed for our own account, we must either
develop a marketing and sales force or contract with another party (including
collaborators) to perform these services for us. In either case, we will be
competing with companies that have experienced and well-funded marketing and
sales operations. We may not be successful in developing a marketing and sales
force or in contracting with a third party on acceptable terms to sell our
products.
WE ARE EXPOSED TO PRODUCT LIABILITY CLAIMS
We may be exposed to liability claims arising from the use of our
product candidates in clinical trials and the commercial sale of any products.
These claims may be brought by consumers, our collaborators or parties selling
the products. We currently carry liability insurance for claims arising from the
use of our product candidates during clinical trials and the commercial sale of
our products in the amount of up to $10 million per occurrence and $10 million
in the aggregate. However, we cannot provide any assurance that this coverage
will be sufficient to satisfy any liabilities that may arise. As our development
activities progress and we begin commercial sales, this coverage may be
inadequate; and we
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may be unable to get adequate coverage at an acceptable cost or we may be unable
to get adequate coverage at all. This could prevent or limit our
commercialization of our product candidates. Even if we are able to continue to
carry insurance that we believe is adequate, our financial condition may be
materially adversely affected by a product liability claim.
WE MAY NOT BE ABLE TO RETAIN OUR KEY EXECUTIVES AND RESEARCH AND DEVELOPMENT
PERSONNEL
Our success depends on the services of key employees in executive and
research and development positions. The loss of the services of one or more of
these employees could have a material adverse effect on our business.
WE MAY ENCOUNTER DIFFICULTIES INTEGRATING FUTURE ACQUISITIONS
As part of our business strategy we may acquire novel technologies or
compounds through acquisitions. Although no current acquisition is planned, we
cannot assure you that any such future acquisition will be successfully
integrated with our current businesses, will achieve revenues or will be
profitable. We may have difficulty assimilating the operations, technology and
personnel of any acquired businesses.
If we make significant acquisitions for stock consideration, the common
stock issuable upon conversion of the notes may be significantly diluted. If we
make significant acquisitions for cash consideration, we may be required to use
a substantial portion of our available cash.
WE DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON STOCK
We have not paid cash dividends on our common stock and do not expect
to do so in the foreseeable future. As of December 31, 1999, we had outstanding
2,303,500 shares of convertible preferred stock in two separate series. We must
pay cash dividends to the holders of the convertible preferred stock, and any
dividends that we do not pay will accrue and remain owing to the holders of the
convertible preferred stock but will not bear interest. We must pay the
accumulated, unpaid dividends on 2,300,000 shares of the convertible preferred
stock before we can declare or pay cash dividends on the common stock.
WE MAY ISSUE MORE COMMON STOCK
As discussed above under "We need to spend substantial funds to become
profitable," we may issue additional equity securities to raise funds, thus
reducing the ownership share of the current holders of our common stock, which
may adversely affect the market price of the common stock. In addition, we must
issue common stock to certain security holders and other parties under the
circumstances described below. Any of these parties could sell all or a large
number of its shares, which could adversely affect the market price of our
common stock. Even if none of these sales happen, the perception by investors
that sales might occur could adversely affect the market price of our common
stock.
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Convertible preferred stock
We may exchange our $3.25 convertible exchangeable preferred stock (the
"$3.25 preferred stock") in whole for debentures, but have no current plans to
do so. Any holder of shares of our $3.25 preferred stock, or the debentures for
which they may have been exchanged, may convert its shares or debentures into
shares of common stock. We have already registered for resale shares of our
common stock issuable upon conversion under the Securities Act of 1933. Each
share of our $3.25 preferred stock is currently convertible into 1.6878 shares
of common stock for a total of 3,881,940 shares of common stock. We are
currently considering various alternatives designed to effect an early
conversion of our $3.25 preferred stock into common stock. We have not reached
any conclusions on whether we will proceed with any of these alternatives.
The holder of our 1999 redeemable convertible exchangeable preferred
stock (the "1999 preferred stock") may convert its shares into common stock (and
non-voting common stock which is convertible into common stock) during any
period that the closing price of our common stock is above $45 per share for at
least ten consecutive trading days. On February 15, 2000, the holder gave us
notice of its intent to convert the 1999 preferred stock. We may redeem all or a
portion of the shares of our 1999 preferred stock for cash or common stock (and
non-voting common stock which is convertible into common stock). We are
obligated to register for resale all shares of common stock after conversion or
redemption for common stock under the Securities Act of 1933. Each share of our
1999 preferred stock is convertible into shares of common stock based on an
average of the closing price of our common stock over a ten-day period.
Convertible note held by Schering
In October 1998, we issued a promissory note in the principal amount of
approximately $6.0 million to Schering Corporation. We have the option to pay in
cash or convert the amount due on this note into our common stock. If we convert
the amount due into common stock, we may need to register the common stock under
the Securities Act of 1933. This note is due in October 2001.
Stock options and awards; warrants
At December 31, 1999, we were obligated to issue the following shares
of common stock under the circumstances described:
- 4,465,511 shares upon the exercise of stock options and
vesting of stock awards; and
- 528,717 shares upon the exercise of warrants.
The warrants expire in March and April 2000. We have already registered
these shares under the Securities Act of 1933.
OUR COMMON STOCK PRICE IS HIGHLY VOLATILE
The realization of any of the risks described in these "Risk Factors"
or other unforeseen risks could have a dramatic and adverse effect on the market
price of our common stock. Additionally, market prices for securities of
biotechnology and pharmaceutical companies, including ours, have historically
been very volatile. The market for these securities has from time to time
experienced significant price and volume fluctuations for reasons that were
unrelated to the operating performance of any one company. In particular and in
addition to circumstances described elsewhere under "Risk Factors," the
following factors can adversely affect the market price of our common stock:
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- announcements of technological innovations or new therapeutic
products by us or others;
- public concern as to the safety of drugs developed by us or
others;
- general market conditions;
- success of research and development programs;
- changes in government regulations or patent decisions; and
- developments of our corporate partners.
ANTI-TAKEOVER PROVISIONS MAY NOT BENEFIT SHAREHOLDERS
We are a Pennsylvania corporation. Anti-takeover provisions of
Pennsylvania law could make it more difficult for a person or group to acquire
control of us, even if the change in control would be beneficial to
shareholders. Our articles of incorporation and bylaws also contain certain
provisions that could have a similar effect. The articles provide that our board
of directors may issue, without shareholder approval, preferred stock having
such voting rights, preferences and special rights as the board of directors may
determine. The issuance of such preferred stock could make it more difficult for
a third party to acquire us.
THE NOTES ARE UNSECURED AND, IN THE EVENT OF OUR INSOLVENCY, LIQUIDATION OR
SIMILAR EVENT, WE MUST PAY IN FULL OUR SENIOR INDEBTEDNESS BEFORE WE CAN MAKE
ANY PAYMENTS ON THE NOTES
The notes are unsecured and subordinated to our existing and future
senior indebtedness. In the event of our insolvency, liquidation, reorganization
or payment default on senior indebtedness, we will not be able to make payments
on the notes until we have paid in full all of our senior indebtedness. We may,
therefore, not have sufficient assets to pay the amounts due on the notes.
Neither we nor our subsidiaries are prohibited from incurring debt under the
indenture for the notes, including debt senior to, on a parity with or
subordinate to the notes. If we incur additional debt, our ability to pay
amounts due on the notes could be adversely affected. As of December 31, 1999,
if the notes had been issued, we would have had approximately $34.1 million of
senior indebtedness. We may also incur additional debt in the future. In
addition, under our senior indebtedness we must maintain minimum levels of
unencumbered cash balances, consolidated capital base and liquidity ratios,
which could further limit our ability to pay the amounts due on the notes.
WE MAY BE REQUIRED TO REPURCHASE THE NOTES UPON A REPURCHASE EVENT
You may require us to repurchase all or any portion of your notes upon
a repurchase event. We may not have sufficient cash funds to repurchase the
notes upon a repurchase event. We may elect, subject to certain conditions, to
pay the repurchase price in common stock. Certain of our existing debt
agreements, as well as future debt agreements, may prohibit us from paying the
repurchase price in either cash or common stock. If we are prohibited from
repurchasing the notes, we could seek consent from our lenders to repurchase the
notes. If we are unable to obtain their consent, we could attempt to refinance
the notes. If we were unable to obtain a consent or refinance, we would be
prohibited from repurchasing the notes. If we were unable to repurchase the
notes upon a repurchase event, it would result in an event of default under the
indenture. An event of default under the indenture could result in a further
event of default under our other then-existing debt. In addition, the occurrence
of the repurchase event may be an
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event of default under our other debt. As a result, we would be prohibited from
paying amounts due on the notes under the subordination provisions of the
indenture.
WE SUBSTANTIALLY INCREASED OUR INDEBTEDNESS
As a result of the sale of the notes by us to the initial purchasers in
February 2000, we incurred $200.0 million of additional indebtedness, increasing
our ratio of debt to equity (expressed as a percentage) from approximately 20.7%
to approximately 143.5% as of December 31, 1999, on a pro forma basis giving
effect to the sale of the notes. If the initial purchasers exercise their option
to purchase an additional $50 million principal amount of the notes, our ratio
of debt to equity (expressed as a percentage) will increase to approximately
174.2% as of December 31, 1999, on a pro forma basis giving effect to the sale
of all of the notes. Our other indebtedness is principally comprised of bank
financing. We may incur substantial additional indebtedness in the future. The
level of our indebtedness, among other things, could
- make it difficult for us to make payments on the notes;
- make it difficult for us to obtain any necessary financing in
the future for working capital, capital expenditures, debt
service requirements or other purposes;
- limit our flexibility in planning for, or reacting to changes
in, our business; and
- make us more vulnerable in the event of a downturn in our
business.
We cannot assure you that we will be able to meet our debt service obligations,
including our obligations under the notes.
THE LIMITED MARKET FOR THE NOTES MAY LIMIT YOUR ABILITY TO SELL YOUR HOLDINGS
The notes are a new issue of securities for which there is currently no
public market. The notes have been approved for trading on the Portal Market. We
cannot be sure that a liquid trading market in the notes will develop. We are
not obligated to list the notes on the Nasdaq National Market System or on a
national securities exchange and we do not intend to do so. We cannot be sure
that a market in the notes will develop.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the securities
covered by this prospectus.
DIVIDEND POLICY
We have not paid any dividends on our common stock since our inception
and do not anticipate paying any dividends on our common stock in the
foreseeable future. For a discussion of dividends payable on our outstanding
preferred stock, see "Description of Capital Stock -- Description of Preferred
Stock."
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED
--------------------------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges and preferred stock
dividends (1) .............. -- -- -- -- -- --
</TABLE>
- ----------------------------
(1) For the fiscal years ended March 31, 1995, 1996, 1997, 1998 and 1999 and
for the nine months ended December 31, 1999, earnings were insufficient to cover
fixed charges by $10,519,000, $11,971,000, $16,414,000, $9,868,000, $30,034,000
and $29,729,000, respectively. For this reason, no ratios are provided.
22
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents our selected consolidated financial information
for each of the years ended March 31, 1995, 1996, 1997, 1998 and 1999, which
have been derived from our Consolidated Financial Statements. The selected data
for each of the nine month periods ended December 31, 1998 and 1999, which have
been derived from our Consolidated Financial Statements, reflect in the opinion
of our management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such periods.
The selected consolidated financial information prior to February 1, 1999 gives
retroactive effect to the acquisition of Advanced Inhalation Research, Inc.
("AIR") on February 1, 1999, which was accounted for as a pooling of interests.
The results for the nine month period ended December 31, 1999 are not
necessarily indicative of results for the full year. The selected financial data
should be read in conjunction with our Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our SEC filings incorporated by reference in this prospectus. See
"Incorporation of Information We File with the SEC."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Research and development revenue
under collaborative
arrangements .................... $ 3,049 $ 2,849 $ 15,969 $ 25,585 $ 33,892 $ 29,457 $ 17,137
Research and development revenue
under collaborative arrangement
with related party .............. 9,277 11,183 1,415 -- -- -- --
Interest income ................... 1,577 1,887 2,443 5,782 9,824 7,565 7,424
-------- -------- -------- -------- -------- -------- --------
Total revenues .................... 13,903 15,919 19,827 31,367 43,716 37,022 24,561
Research and development expenses.. 18,955 21,586 29,554 31,762 48,457 34,804 39,323
Net loss .......................... (11,904) (13,747) (18,798) (12,582) (41,057) (25,803) (39,920)
Preferred stock dividends ......... -- -- -- -- 7,454 5,586 6,846
-------- -------- -------- -------- -------- -------- --------
Net loss attributable to common
shareholders .................... $(11,904) $(13,747) $(18,798) $(12,582) $(48,511) $(31,389) $(46,766)
======== ======== ======== ======== ======== ======== ========
Basic and diluted loss per common
share ........................... $ (0.88) $ (0.93) $ (1.03) $ (0.55) $ (1.98) $ (1.28) $ (1.85)
======== ======== ======== ======== ======== ======== ========
Weighted average number of common
shares .......................... 13,535 14,775 18,288 23,019 24,558 24,611 25,221
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
---------------------------------------------------------------- ------------------
1995 1996 1997 1998 1999 1999
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents and
short-term investments .... $ 21,351 $ 32,374 $ 85,297 $ 194,257 $ 163,419 $ 152,550
Total assets ................ 36,708 45,752 104,697 220,977 213,452 213,045
Long-term debt, less current
portion ................... 8,376 9,876 10,914 12,933 28,417 24,142
Accumulated deficit ......... (87,300) (101,047) (119,844) (132,427) (180,937) (227,704)
Shareholders' equity ........ 21,163 23,513 79,151 181,455 156,206 162,823
</TABLE>
23
<PAGE> 26
DESCRIPTION OF NOTES
We issued the notes under an indenture dated as of February 18, 2000,
between us and State Street Bank & Trust Company, as trustee, and are
registering the resale of the notes and the common stock underlying the notes on
the registration statement of which this prospectus is a part, pursuant to a
registration rights agreement with the initial purchasers. The following
summarizes some, but not all, of the provisions of the notes, the indenture and
the registration rights agreement. You should refer to the actual terms of the
notes, the indenture and the registration rights agreement for the definitive
terms and conditions. As used in this description, the words "we," "us" or "our"
do not include any current or future subsidiary of Alkermes.
GENERAL
The notes are unsecured general obligations that are subordinate in
right of payment as described under "Subordination." The notes are convertible
into common stock as described under "Conversion by Holders." The aggregate
principal amount of the notes is limited to $250,000,000. The notes are issued
in fully registered form and denominated in integral multiples of $1,000. The
notes will mature on February 15, 2007 unless earlier converted, redeemed or
repurchased.
The notes bear interest at the annual rate shown on the cover page of
this prospectus. Interest will be paid on each February 15 and August 15 of each
year, beginning August 15, 2000, subject to limited exceptions if the notes are
converted, redeemed or repurchased prior to the applicable interest payment
date. The record dates for payment of interest will be February 1 and August 1.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months.
We will maintain an office in the Borough of Manhattan in New York, New
York where the notes may be presented for registration, transfer, exchange or
conversion. Initially, this will be an office or agency of the trustee. We may,
at our option, pay interest on the notes by check mailed to the registered
holders of notes. However, holders of more than $2,000,000 in principal amount
of notes may elect in writing to be paid by wire transfer; provided that any
payment to The Depository Trust Company ("DTC") or its nominee will be made by
wire transfer of immediately available funds to the account of DTC or its
nominee.
We are not restricted from paying dividends or repurchasing securities
or incurring indebtedness under the indenture. The indenture has no financial
covenants. You are not protected in the event of a highly leveraged transaction
or a change in control of Alkermes except as described under "Repurchase at
Option of Holders upon a Repurchase Event" below.
You will not be required to pay a service charge for registration or
transfer of your notes. We may, however, require you to pay any tax or other
governmental charge in connection with the transfer. We are not required to
exchange or register the transfer of:
- any note for a period of 15 days before selection for
redemption;
- any note or portion selected for redemption;
- any note or portion surrendered for conversion; or
- any note or portion surrendered for repurchase but not
withdrawn in connection with a repurchase event.
24
<PAGE> 27
FORM, DENOMINATION AND REGISTRATION
Global Security; Book-Entry Form
The notes are evidenced by a global security initially deposited with
DTC, and registered in the name of Cede & Co. ("Cede") as DTC's partnership
nominee. Except as set forth below, the global security may be transferred only
to another nominee of DTC or to a successor of DTC or its nominee.
Qualified institutional buyers, as defined in Rule 144A under the
Securities Act of 1933, may hold their interests in the global security directly
through DTC or indirectly through organizations which are participants in DTC
("participants"). Transfers between participants will be affected in the
ordinary way in accordance with DTC rules and will be settled in clearinghouse
funds. The laws of some states require that some persons take physical delivery
of securities in definitive form. As a result, you may be unable to transfer
beneficial interests in the global security to those persons.
Holders that are not participants may beneficially own interests in the
global security held by DTC only through participants or banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants"). So long as Cede, as the nominee of DTC, is the
registered owner of the global security, Cede will be considered the sole holder
of the global security for all purposes. Except as provided below, owners of
beneficial interests in the global security will not:
- be entitled to have certificates registered in their names;
- be entitled to receive physical delivery of certificates in
definitive form; or
- be considered the registered holders thereof.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global security to Cede, the nominee for
DTC as the registered holder of the global security. We will make these payments
by wire transfer of immediately available funds. Neither we, the trustee nor any
paying agent will have any responsibility or liability for:
- any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the global
security; or
- maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global security
as shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on the payment date. Payments by participants to owners of
beneficial interests in notes represented by the global security held through
participants will be the responsibility of those participants, as is now the
case with securities held for the accounts of customers registered in "street
name."
We will send any redemption notices to Cede. We understand that if less
than all of the notes are being redeemed, DTC's practice is to determine by lot
the amount of the holdings of each participant to be redeemed.
25
<PAGE> 28
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an "omnibus proxy" to us as soon as possible after the record date.
The omnibus proxy assigns Cede's consenting or voting rights to those
participants to whose accounts the notes are credited on the record date
identified in a listing attached to the omnibus proxy.
A person having a beneficial interest in notes represented by the
global security may be unable to pledge that interest to persons or entities
that do not participate in the DTC system, or to take other actions in respect
of that interest, because that beneficial interest is not represented by a
physical certificate.
We and the trustee have no responsibility for the performance by DTC,
its participants and its indirect participants, of their respective obligations
under the rules and procedures governing their operations. DTC has advised us
that it will take any action permitted to be taken by a holder of notes,
including the presentation of notes for conversion as described below, only at
the direction of one or more participants whose DTC accounts are credited with
interests in the global security and only in respect of the principal amount of
the notes represented by the global security as to which those participants have
given such a direction.
DTC has advised us as follows:
- DTC is a limited purpose trust company organized under the
laws of the State of New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act.
DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes to accounts of its
participants. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include other types of
organizations. Some of the participants, together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
DTC is under no obligation to perform or continue to perform the above
procedures, and these procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by us within 90 days, we will cause notes to be
issued in definitive form in exchange for the global security.
Certificated Notes
Qualified institutional buyers may request that certificated notes be
issued in exchange for notes represented by the global security. In addition,
certificated notes may be issued in exchange for notes represented by the global
security if no successor depositary is appointed by us as set forth in the
preceding paragraph.
26
<PAGE> 29
Restrictions on Transfer; Legends
Prior to resale pursuant to this prospectus, the notes will bear a
restrictive legend upon issuance as described in the indenture.
CONVERSION BY HOLDERS
If you purchase the notes, you may, at your option, convert your notes,
in whole or in part, at any time prior to maturity into our common stock at an
initial conversion price of $135.50 per share. You may convert notes in
denominations of $1,000 and multiples of $1,000. The conversion price is subject
to adjustment as described below. If the notes are called for redemption, your
conversion rights on the notes called for redemption will expire at the close of
business of the last business day before the redemption date, unless we default
in payment of the redemption price. If you have submitted your notes for
repurchase after a repurchase event, you may only convert your notes if you
deliver a withdrawal notice before the close of business on the last business
day before the repurchase date.
Except as described below, we will not make any adjustment for accrued
interest or dividends on common stock upon conversion of the notes. If you
convert your notes after a record date and prior to the next interest payment,
you will have to pay us interest, unless the notes have been called for
redemption under the indenture. We will pay a cash adjustment for any fractional
shares based on the market price of our common stock on the last business day
before the conversion date.
You can convert your notes by delivering the notes to an office or
agency of the Trustee in the Borough of Manhattan, The City of New York, along
with a duly signed and completed notice of conversion, a form of which may be
obtained from the trustee. In the case of a global security, DTC will effect the
conversion upon notice from the holder of a beneficial interest in the global
security in accordance with DTC's rules and procedures. See the description of
DTC's procedures under "Form, Denomination and Registration." The conversion
date will be the date on which the notes and the duly signed and completed
notice of conversion are delivered. As promptly as practicable on or after the
conversion date, but no later than three business days after the conversion
date, we will issue and deliver to the conversion agent certificates for the
number of full shares of common stock issuable upon conversion, together with
any cash payment for fractional shares. In the event we fail to convert your
notes into common stock in accordance with the terms of the indenture, you may
bring an action to enforce your right to convert.
If you deliver a note for conversion, you will not be required to pay
any taxes or duties for the issue or delivery of common stock on conversion.
However, we will not pay any transfer tax or duty payable as a result of the
issuance or delivery of the common stock in a name other than that of the holder
of the note. We will not issue or deliver common stock certificates unless we
have been paid the amount of any transfer tax or duty or we have been provided
satisfactory evidence that the transfer tax or duty has been paid.
The conversion price of $135.50 per share will be adjusted if:
1. we dividend or distribute shares of our common stock to our
common stock holders;
2. we split, subdivide or combine our common stock;
3. we issue rights or warrants to all holders of our common stock
to purchase common stock at less than the current market price;
27
<PAGE> 30
4. we dividend or distribute to all holders of our common stock
capital stock or evidences of indebtedness or assets, but
excluding:
- dividends, distributions and rights or warrants
referred to in (3) above or to be exercised in
connection with certain trigger events;
- dividends and distributions paid exclusively in cash
or paid in connection with our liquidation,
dissolution or winding up; or
- capital stock, evidence of indebtedness, cash or
assets distributed in a merger or consolidation.
5. we make a dividend or distribution consisting exclusively of
cash to all holders of common stock if the aggregate amount of
these distributions combined together with (A) all other all-cash
distributions made within the preceding 12 months in respect of
which we made no adjustment plus (B) any cash and the fair market
value of other consideration payable in any tender offers by us or
any of our subsidiaries for common stock concluded within the
preceding 12 months in respect for which we made no adjustment,
exceeds 10% of our market capitalization, being the product of the
then current market price of the common stock multiplied by the
number of shares of our common stock then outstanding;
6. the purchase of common stock pursuant to a tender offer made by
us or any of our subsidiaries involves an aggregate consideration
that, together with (A) any cash and the fair market value of any
other consideration payable in any other tender offer by us or any
of our subsidiaries for common stock expiring within the 12 months
preceding such tender offer plus (B) the aggregate amount of any
such all-cash distributions referred to in (5) above to all
holders of common stock within the 12 months preceding the
expiration of the tender offer for which we have made no
adjustment, exceeds 10% of our market capitalization on the
expiration of such tender offer; or
7. payment on tender offers or exchange offers by a third party
other than Alkermes or our subsidiaries if, as of the closing date
of the offer, our board of directors does not recommend rejection
of the offer. We will only make this adjustment if a tender offer
increases the person's ownership to more than 25% of our
outstanding common stock and the payment per share is greater than
the current market price of the common stock. We will not make
this adjustment if the tender offer is a merger or transaction
described below under "-- Consolidation, Merger or Transfer of
Assets."
If we implement a stockholders' rights plan, we will be required under
the indenture to provide that the holders of notes will receive the rights upon
conversion of the notes, whether or not these rights were separated from the
common stock prior to conversion.
If we reclassify our common stock, consolidate, merge or combine with
another person or sell or convey our property and assets as an entirety or
substantially as an entirety, each note then outstanding will, without the
consent of the holder of any note, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, combination, sale or conveyance by a
holder of the number of shares of common stock into which the note was
convertible immediately prior to the reclassification, consolidation, merger,
combination, sale or conveyance. This calculation will be made based on the
assumption that the holder of common stock failed to exercise any rights of
election that the holder may have to select a particular type of
28
<PAGE> 31
consideration. The adjustment will not be made for a consolidation, merger or
combination that does not result in any reclassification, conversion, exchange
or cancellation of our common stock.
You may, in some circumstances, be deemed to have received a
distribution or dividend subject to United States federal income tax as a result
of an adjustment (or the nonoccurrence of an adjustment) to the conversion
price. See "United States Federal Income Tax Considerations."
We are permitted to reduce the conversion price of the notes for
limited periods of time, if our board of directors deems it advisable. Any such
reduction shall be effective for not less than 20 days. We are required to give
at least 15 days' prior notice of any such reduction. We may also reduce the
conversion price to avoid or diminish income tax to holders of our common stock
in connection with a dividend or distribution of stock or similar event.
No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least one percent. Any
adjustment not made will be taken into account in subsequent adjustments.
PROVISIONAL REDEMPTION
We may redeem some or all of the notes at any time prior to February
19, 2003, at a redemption price equal to $1,000 per note plus accrued and unpaid
interest to the redemption date if (1) the closing price of our common stock has
exceeded 200% of the conversion price for at least 20 trading days in the
consecutive 30-trading day period ending on the trading day immediately prior to
the mailing of the notice of redemption and (2) the shelf registration statement
covering resales of the notes and the common stock is effective and expected to
remain effective and available for use for the 30 days following the redemption
date.
If we redeem some or all of the notes prior to February 15, 2001, we
will also make an additional payment on the redeemed notes equal to one year of
interest per $1,000 note, minus the amount of any interest we actually paid on
the notes prior to the date we mailed the notice. We must make these additional
payments on all notes called for redemption, including notes converted after the
date we mailed the notice.
OPTIONAL REDEMPTION
At any time on or after February 19, 2003, we may redeem some or all of
the notes, at our option, at the redemption prices specified below. The
redemption price, expressed as a percentage of the principal amount, is as
follows for the 12-month periods beginning on February 15 of the year indicated
(February 19, 2003 through February 14, 2004, in the case of the first such
period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2003....................................................................................102.14%
2004....................................................................................101.61&
2005....................................................................................101.07%
2006....................................................................................100.54%
</TABLE>
and 100% of the principal amount on February 15, 2007. In each case we will also
pay accrued and unpaid interest to, but excluding, the redemption date. If the
redemption date is an interest payment date, we will pay interest to the record
holders as of the relevant record date. We are required to give notice of
redemption not more than 60 and not less than 30 days before the redemption date
under the indenture.
29
<PAGE> 32
No sinking fund is provided for the notes, which means that the
indenture does not require us to redeem or retire the notes periodically. We may
not redeem the notes if there is a default under the indenture. See "Events of
Default and Remedies."
REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT
If a repurchase event occurs, you will have the right, at your option,
to require us to repurchase all or any portion of your notes 40 days after we
mail holders a notice of repurchase event. The repurchase price we are required
to pay will be 105% of the principal amount of the notes submitted for
repurchase, plus accrued and unpaid interest to, but excluding, the repurchase
date. If a repurchase date is an interest payment date, we will pay to the
record holder on the record date.
At our option, instead of paying the repurchase price in cash, we may
pay the repurchase price in common stock, valued at 95% of the average of the
closing prices for the five trading days immediately before and including the
third trading day preceding the repurchase date. We may only pay the repurchase
price in common stock if we satisfy conditions provided in the indenture.
A repurchase event will be considered to have occurred if:
1. our common stock or other common stock into which the notes
are convertible is neither listed for trading on a United
States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in
the United States, or
2. one of the following "change in control" events occurs:
- any person or group becomes the beneficial owner of
more than 50% of the voting power of our outstanding
securities entitled to generally vote for directors;
- our stockholders approve any plan or proposal for
our liquidation, dissolution or winding up;
- we consolidate with or merge into any other
corporation or any other corporation merges into us
and, as a result, our outstanding common stock is
changed or exchanged for other assets or securities
unless our shareholders immediately before the
transaction own, directly or indirectly, immediately
following the transaction at least 51% of the
combined voting power of the corporation resulting
from the transaction in substantially the same
proportion as their ownership of our voting stock
immediately before the transaction;
- we convey, transfer or lease all or substantially
all of our assets to any person; or
- the continuing directors do not constitute a
majority of our board of directors at any time.
However, a change in control will not be deemed to have
occurred if:
- the last sale price of our common stock for any five
trading days during the 10 trading days immediately
before the change in control is equal to at least
105% of the conversion price, or
30
<PAGE> 33
- all of the consideration, excluding cash payments for
fractional shares in the transaction constituting the
change in control, consists of common stock traded on
a United States national securities exchange or
quoted on the Nasdaq National Market, and as a result
of the transaction the notes become convertible
solely into that common stock.
The term "continuing director" means at any date a member of
our board of directors:
- who was a member of our board of directors on
December 31, 1999; or
- who was nominated or elected by at least a majority
of the directors who were continuing directors at the
time of the nomination or election or whose election
to our board of directors was recommended by at least
a majority of the directors who were continuing
directors at the time of the nomination or election
or by the nominating committee comprised of our
independent directors.
Under the above definition of continuing director, if the current board
of directors approved a new director or directors and then resigned, no change
in control would occur. The interpretation of the phrase "all or substantially
all" used in the definition of change in control would likely depend on the
facts and circumstances existing at such time. As a result, there may be
uncertainty as to whether or not a sale or transfer of "all or substantially
all" of our assets has occurred.
We will be required to mail you a notice within 15 days after the
occurrence of a repurchase event. The notice must describe, among other things,
the repurchase event, your right to elect repurchase of the notes and the
repurchase date. We must deliver a copy of the notice to the trustee and cause a
copy, or a summary of the notice, to be published in a newspaper of general
circulation in New York, New York. You may exercise your repurchase rights by
delivering written notice to us and the trustee. The notice must be accompanied
by the notes duly endorsed for transfer to us. You must deliver the exercise
notice on or before the close of business on the thirty-fifth calendar day after
the mailing date of the repurchase notice.
You may require us to repurchase all or any portion of your notes upon
a repurchase event. We may not have sufficient cash funds to repurchase the
notes upon a repurchase event. We may elect, subject to certain conditions, to
pay the repurchase price in common stock. Certain of our existing debt
agreements, as well as future debt agreements, may prohibit us from paying the
repurchase price in either cash or common stock. If we are prohibited from
repurchasing the notes, we could seek consent from our lenders to repurchase the
notes. If we are unable to obtain their consent, we could attempt to refinance
the notes. If we were unable to obtain a consent or refinance, we would be
prohibited from repurchasing the notes. If we were unable to repurchase the
notes upon a repurchase event, it would result in an event of default under the
indenture. An event of default under the indenture could result in a further
event of default under our other then-existing debt. In addition, the occurrence
of the repurchase event may be an event of default under our other debt. As a
result, we would be prohibited from paying amounts due on the notes under the
subordination provisions of the indenture.
The change in control feature may not necessarily afford you protection
in the event of a highly leveraged transaction, a change in control or similar
transactions involving us. We could, in the future, enter into transactions,
including recapitalizations, that would not constitute a change in control but
that would increase the amount of our senior indebtedness or other debt. We are
not prohibited from incurring senior indebtedness or debt under the indenture.
If we incur significant amounts of additional debt, this could have an adverse
effect on our ability to make payments on the notes.
31
<PAGE> 34
In addition, our management could undertake leveraged transactions that
could constitute a change in control. The Board of Directors does not have the
right under the indenture to limit or waive the repurchase right in the event of
these types of leveraged transaction. Our requirement to repurchase notes upon a
repurchase event could delay, defer or prevent a change of control. As a result,
the repurchase right may discourage:
- a merger, consolidation or tender offer;
- the assumption of control by a holder of a large
block of our shares; and
- the removal of incumbent management.
The repurchase feature was a result of negotiations between us and the
initial purchasers in the initial private placement. The repurchase feature is
not the result of any specific effort to accumulate shares of common stock or to
obtain control of us by means of a merger, tender offer or solicitation, or part
of a plan by us to adopt a series of anti-takeover provisions. We have no
present intention to engage in a transaction involving a change of control,
although it is possible that we would decide to do so in the future.
The Securities Exchange Act and the SEC rules thereunder require the
distribution of specific types of information to security holders in the event
of issuer tender offers. These rules may apply in the event of a repurchase. We
will comply with these rules to the extent applicable.
SUBORDINATION
The notes are unsecured and subordinated to the prior payment in full
of all existing and future senior indebtedness as provided in the indenture.
Upon any distribution of our assets upon our dissolution, winding up,
liquidation or reorganization, payments on the notes will be subordinated to the
prior payment in full of all senior indebtedness. If the notes are accelerated
following an event of default under the indenture, the holders of any senior
indebtedness will be entitled to payment in full before the holders of the notes
are entitled to receive any payment on the notes.
We may not make any payments on the notes if:
- we default in the payment on senior indebtedness
beyond any grace period; or
- any other default occurs and is continuing under any
designated senior indebtedness that permits holders
of the designated senior indebtedness to accelerate
its maturity, and we and the trustee receive a
notice known as a payment blockage notice from a
person permitted to give this notice under the
indenture.
We may resume making payments on the notes:
- in the case of a payment default, when the default
is cured or waived or ceases to exist; and
- in the case of a nonpayment default, the earlier of
when the default is cured or waived or ceases to
exist or 179 days after receipt of the payment
blockage notice.
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No new period of payment blockage may be commenced unless:
- 365 days have elapsed since our receipt of the prior
payment blockage notice; and
- all scheduled payments on the notes have been paid
in full, or the trustee or the holders of notes
shall not have begun proceedings to enforce the
right of the holders to receive payments.
No default that existed on any senior indebtedness on the date of
delivery of any payment blockage notice may be the basis for a subsequent
payment blockage notice.
The term "senior indebtedness" means the principal, premium, if any,
and interest on, including bankruptcy interest, and any other payment on the
following current or future incurred:
- indebtedness for money borrowed or evidenced by
notes, debentures, bonds or other securities;
- reimbursement obligations under letters of credit,
bank guarantees or bankers' acceptances;
- indebtedness under interest rate and currency swap
agreements, cap, floor and collar agreements,
currency spot and forward contracts and other
similar agreements and arrangements;
- indebtedness consisting of commitment or standby
fees under our credit facilities or letters of
credit;
- obligations under leases required or permitted to be
capitalized under generally accepted accounting
principles;
- obligations of the type listed above that have been
assumed or guaranteed by us or in effect guaranteed,
directly or indirectly, by us through an agreement
to purchase; and
- any amendment, modification, renewal, extension,
refunding or deferral of any indebtedness or
obligation of type listed in the bullet points
above.
Senior indebtedness will not include:
- any indebtedness or amendment or modification that
expressly provides that it is subordinate to or is
not senior to or is on the same basis as the notes;
- any indebtedness to any subsidiary;
- indebtedness for trade payables or the deferred
purchase price of assets or services incurred in the
ordinary course of business; or
- the notes.
If the trustee or any holder of the notes receives any payment or
distribution of our assets of any kind on the notes in contravention of any of
the terms of the indenture, then such payment or distribution will be held by
the recipient in trust for the benefit of the holders of senior indebtedness,
and will be
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immediately paid or delivered to the holders of senior indebtedness
or their representative or representatives.
In the event of our insolvency, liquidation, reorganization or payment
default on senior indebtedness, we will not be able to make payments on the
notes until we have paid in full all of our senior indebtedness. We may,
therefore, not have sufficient assets to pay the amounts due on the notes.
Neither we nor our subsidiaries are prohibited from incurring debt under the
indenture. If we incur additional debt, our ability to pay amounts due on the
notes could be adversely affected. As of December 31, 1999, if the notes had
been issued, we would have had approximately $34.1 million of senior
indebtedness. We may also incur additional debt in the future. The subordination
provisions will not prevent the occurrence of any default or event of default or
limit the rights of any holder of notes to pursue any other rights or remedies
with respect to the notes.
As a result of the subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings, holders of the notes may receive less than other creditors on a
ratable basis.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute "events of default" under the
indenture:
- we fail to pay the principal or premium, if any, on
any of the notes when due, whether or not prohibited
by the subordination provisions of the indenture;
- we fail to pay interest or liquidated damages on the
notes when due if such failure continues for 30
days, whether or not prohibited by the subordination
provisions of the indenture;
- we fail to perform any covenant in the indenture if
such failure continues for 45 days after notice is
given in accordance with the indenture;
- we fail to repurchase any notes after a repurchase
event;
- we fail to provide timely notice of a repurchase
event;
- we fail or any of our significant subsidiaries fail
to make any payment at maturity on any indebtedness,
including any applicable grace periods, in an amount
in excess of $7,500,000, and such amount has not
been paid or discharged within 30 days after notice
is given in accordance with the indenture;
- a default by us or any significant subsidiary on any
indebtedness that results in the acceleration of
indebtedness in an amount in excess of $7,500,000,
without this indebtedness being discharged or the
acceleration being rescinded or annulled for 30 days
after notice is given in accordance with the
indenture; or
- certain events involving bankruptcy, insolvency or
reorganization of us or any significant subsidiary.
The trustee is generally required under the indenture, within 90 days
after its becoming aware of a default, to provide holders written notice of all
incurred default. However, the trustee may, except in the
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case of a payment default on the notes, withhold this notice of default if it
determines that withholding the notice is in the best interest of the holders.
If an event of default has occurred and is continuing, the trustee or
the holders of not less than 25% in principal amount of outstanding notes, may
declare the principal and premium, if any, on the notes to be immediately due
and payable. After acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding notes may, under circumstances set forth in the indenture, rescind
the acceleration of the principal of and premium, if any, on the notes, other
than the payment of principal of the notes that has become due other than
because of the acceleration. If an event of default arising from events of
bankruptcy, insolvency or reorganization occurs and is continuing with respect
to us, all unpaid principal of and accrued interest on the outstanding notes
would become due and payable immediately without any declaration or other act on
the part of the trustee or holders of notes.
Holders of a majority in principal amount of outstanding notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee, subject to specified limitations. Before exercising any right or power
under the indenture at the direction of the holders, the trustee will be
entitled to receive from such holders reasonable security or indemnity against
any costs, expenses and liabilities that it might incur as a result.
Before you may take any action to institute any proceeding relating to
the indenture, or to appoint a receiver or a trustee, or for any other remedy,
each of the following must occur:
- you must have given the trustee written notice of a
continuing event of default;
- the holders of at least 25% of the aggregate
principal amount of all outstanding notes must make
a written request of the trustee to take action
because of the default;
- holders must have offered reasonable indemnification
to the trustee against the cost, expenses and
liabilities of taking action; and
- the trustee must not have taken action for 60 days
after receipt of such notice and offer of
indemnification.
These limitations do not apply to a suit for the enforcement of payment
of the principal of or any premium or interest on a note or the right to convert
the note in accordance with the indenture.
Generally, the holders of not less than a majority of the aggregate
principal amount of outstanding notes may waive any default or event of default,
except if:
- we fail to pay the principal of, premium or interest
on any note when due;
- we fail to convert any note into common stock; or
- we fail to comply with any of the provisions of the
indenture that would require the consent of the
holder of each outstanding note affected.
We will send the trustee annually a statement as to whether we are in
default and the nature of any default under the indenture.
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CONSOLIDATION, MERGER OR TRANSFER OF ASSETS
We may not consolidate or merge into another person or sell, lease,
convey or transfer all or substantially all of our assets to another person,
whether in a single or series of related transactions, unless:
- either (A) we are the surviving entity, or (B) the
resulting entity is a U.S. corporation, limited
liability company, partnership or trust and
expressly assumes in writing all of our obligations
under the notes and the indenture;
- no default or event of default exists or would
occur; and
- other conditions specified in the indenture are
satisfied.
MODIFICATIONS OF THE INDENTURE
The consent of the holders of a majority in principal amount of the
outstanding notes affected is required to make a modification or amendment to
the indenture. However, a modification or amendment requires the consent of the
holder of each outstanding note affected if it would:
- extend the fixed maturity of any note;
- reduce the interest rate or extend the time of
payment of interest on any note;
- reduce the principal amount or any premium of any
note;
- reduce any amount payable upon redemption or
repurchase of any note;
- adversely change our obligation to repurchase any
note upon a repurchase event;
- adversely change the holder's right to institute
suit for the payment of any note;
- change the currency in which any note is payable;
- adversely modify the right to convert the notes;
- adversely modify the subordination provisions of the
notes; or
- change the percentage required to consent to
modifications and amendments.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding if:
- all notes will become due in one year or are
scheduled for redemption in one year; and
- we deposit sufficient funds to pay all outstanding
notes on their scheduled maturity or redemption
date.
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REGISTRATION RIGHTS GRANTED TO THE INITIAL PURCHASERS OF THE NOTES
We and the initial purchasers of the Notes entered into a registration
rights agreement on February 18, 2000. We are filing this registration statement
pursuant to our obligations under the registration rights agreement. Under the
registration rights agreement, we are required to:
- file, within 60 days after February 18, 2000, a
shelf registration statement covering the resale of
the notes and the common stock issuable upon
conversion of the notes;
- use our reasonable best efforts to cause the shelf
registration to be declared effective as promptly as
practicable; and
- use our best efforts to keep the shelf registration
statement effective until the earlier of the resale
of all the transfer restricted securities or two
years after the latest date of original issuance.
When we use the term "transfer restricted securities" in this section,
we mean the notes and the common stock issued upon conversion of the notes until
the earlier of the following events:
- the date the notes or common stock issued upon
conversion have been effectively registered under
the Securities Act and sold or transferred pursuant
to the shelf registration statement; or
- the date the notes or common stock issued upon
conversion are distributed to the public pursuant to
Rule 144 under the Securities Act or are saleable
pursuant to Rule 144(k) under the Securities Act; or
- the date the notes or common stock issued upon
conversion cease to be outstanding.
We will be required to pay predetermined liquidated damages if one of
the following "registration defaults" occurs:
- we do not file the shelf registration statement
within 60 days after February 18, 2000;
- the SEC does not declare the shelf registration
statement effective within 150 days after such date;
or
- after it has been declared effective and during the
period in which we are obligated to keep it
effective, the shelf registration statement ceases
to be effective or available for more than 90 days
in any period of 365 consecutive days.
If a registration default occurs, liquidated damages initially will
accrue (a) for the notes that are transfer restricted securities, at the rate of
$.05 per week per $1,000 principal amount of the notes and (b) for any common
stock issued on conversion of the notes that are transfer restricted securities,
at an equivalent rate based on the conversion price. If the registration default
has not been cured within 90 days, the liquidated damages rate will increase by
$.05 per week per $1,000 principal amount of the notes that are transfer
restricted securities (and an equivalent amount for any common stock issued upon
conversion of the notes that are transfer restricted securities) for each
subsequent continuing 90-day non-compliance period, up to a maximum rate of $.25
per week per $1,000 principal amount of the notes that are transfer restricted
securities (and an equivalent amount for any common stock issued upon conversion
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of the notes that are restricted securities). Liquidated damages generally will
be payable at the same time as interest payments on the notes.
We may suspend the use of this prospectus, which is a part of the shelf
registration statement, in certain circumstances described in the registration
rights agreement upon notice to the holders of the transfer restricted
securities. We will provide copies of this prospectus and notify registered
holders of notes and common stock issued upon conversion when the shelf
registration statement is filed and when it becomes effective.
We agreed to distribute a questionnaire to each holder to obtain
certain information regarding the holder for inclusion in this prospectus.
GOVERNING LAW
The notes, the indenture and the registration rights agreement are
governed by the laws of the State of New York, without regard to conflicts of
laws principles.
CONCERNING THE TRUSTEE
We have appointed the trustee as the initial paying agent, conversion
agent, registrar and custodian for the notes. We may maintain deposit accounts
and conduct other banking transactions with the trustee or its affiliates in the
ordinary course of business. In addition, the trustee and its affiliates may in
the future provide banking and other services to us in the ordinary course of
their business.
If the trustee becomes one of our creditors, the indenture and the
Trust Indenture Act of 1939 may limit the right of the trustee to obtain payment
on or realize on security for its claims. If the trustee develops any
conflicting interest with the holders of notes or us, it must eliminate the
conflict or resign.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Alkermes' authorized capital stock consists of 80,000,000 shares of
common stock, $.01 par value, 2,696,500 shares of capital stock, $.01 par value,
which have not been designated as to class or series, 2,300,000 shares of $3.25
convertible exchangeable preferred stock, $.01 par value (the "$3.25 preferred
stock"), and 3,500 shares of 1999 convertible exchangeable preferred stock, $.01
par value (the "1999 preferred stock"). As of December 31, 1999, there were
25,523,852 shares of common stock outstanding, 2,300,000 shares of the $3.25
preferred stock outstanding and 3,500 shares of the 1999 preferred stock
outstanding.
The following summary of the terms and provisions of our capital stock
does not purport to be complete and is qualified in its entirety by reference to
our amended and restated certificate of incorporation and bylaws.
DESCRIPTION OF COMMON STOCK
The majority of our authorized capital stock consists of common stock,
par value $.01 per share. The holders of common stock are entitled to one vote
for each share held of record on all matters submitted to a vote of
shareholders. Subject to preferences applicable to any series or class of
capital stock with superior dividend rights that may be outstanding, holders of
common stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. We have paid
no cash dividends on our common stock and do not anticipate paying cash
dividends on our common stock in the foreseeable future.
In the event of liquidation, dissolution or winding up of Alkermes,
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities and the liquidation preference of any series or
class of capital stock with superior liquidation rights that may be outstanding.
The outstanding shares of common stock are, and the common stock to be issued
upon conversion of the notes will be, fully paid and nonassessable. No
pre-emptive rights, conversion rights, redemption rights or sinking fund
provisions are applicable to the common stock.
The 1988 Pennsylvania Business Corporation Law ("1988 BCL") includes
certain shareholder protection provisions, which apply to us. The following is a
description of those provisions of the 1988 BCL that apply to us and that may
have an anti-takeover effect. This description of the 1988 BCL is only a summary
thereof, does not purport to be complete and is qualified in its entirety by
reference to the full text of the 1988 BCL.
(i) Upon a control-share acquisition (acquiring person
acquires or proposes to acquire 20%, 33 1/3% or 50% or more of the
voting power of our common stock) the 1988 BCL operates to suspend the
voting rights of the control shares (the newly acquired shares upon
such an acquisition, plus any shares acquired within 180 days of
exceeding a threshold) held by an acquiring person upon a control share
acquisition. The acquiring person can regain his right to vote such
control shares upon the approval of a majority of the outstanding
disinterested shares and a majority of all common stock.
(ii) The disgorgement provisions require a controlling person
(a person who acquired, offered to acquire or publicly disclosed the
intention of acquiring at least 20% of the voting power of Alkermes) to
disgorge "greenmail" profits, or profits realized from the disposition
of our securities within 18 months after becoming a controlling person
and the
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security was acquired by the controlling person within 24 months before
or 18 months after becoming a controlling person.
(iii) The control transaction provisions of the 1988 BCL allow
holders of voting shares of a corporation to "put" their stock to an
acquiror for fair value in the event of a control transaction (the
acquisition of 20% of voting power over our common stock). Fair value
is defined as not less than the highest price paid by the acquiror
during a certain 90 day period.
(iv) An interested shareholder (the beneficial owner of 20% of
the voting stock either of a corporation or of an affiliate of the
corporation who was at any time within the five-year period immediately
prior to the date in question the beneficial owner of 20% of the voting
stock of the corporation) cannot engage in a business combination with
the corporation for a period of five years unless: (a) the board
approves the business combination prior to the interested shareholder
becoming such or approves the acquisition of shares in advance, or (b)
if the interested shareholder owns 80% of such stock, the business
combination is approved by a majority of the disinterested shareholders
and the transaction satisfies certain "fair price" provisions. After
the five-year period, the same restrictions apply, unless the
transaction either is approved (a) by a majority of the disinterested
shareholders and satisfies the fair price provisions or (b) by all
shareholders.
(v) Corporations may adopt shareholders' rights plans with
discriminatory provisions (sometimes referred to as poison pills)
whereby options to acquire shares or corporate assets are created and
issued which contain terms that limit persons owning or offering to
acquire a specified percentage of outstanding shares from exercising,
converting, transferring or receiving options and allows the exercise
of options to be limited to shareholders or triggered based upon
control transactions. Such poison pills take effect only in the event
of a control transaction. Pursuant to the 1988 BCL, such poison pills
may be adopted by the Board without shareholder approval.
(vi) Shareholders of a corporation do not have a statutory
right to call special meetings of shareholders or to propose amendments
to the articles under the provisions of the 1988 BCL.
(vii) In discharging the duties of their respective positions,
the board of directors, committees of the board and individual
directors may, in considering the best interests of the corporation,
consider to the extent they deem appropriate, (i) the effects of any
action upon shareholders, employees, suppliers, customers and creditors
of the corporation and the community in which the corporation is
located, (ii) the short-term and long-term interests of the
corporation, including benefits that may accrue to the corporation from
its long-term plans and the possibility that these interests may be
best served by the continued independence of the corporation, (iii) the
resources, intent and conduct (past, stated and potential) of any
person seeking to acquire control of the corporation and (iv) all other
pertinent factors. Further, the board of directors, committees of the
board and individual directors are not required, in considering the
best interests of the corporation or the effects of any action, to
regard any corporate interest or the interests of any particular group
affected by such action as a dominant or controlling interest or
factor. The consideration of the foregoing factors shall not constitute
a violation of the applicable standard of care.
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DESCRIPTION OF PREFERRED STOCK
The Board of Directors has the authority, from time to time and without
further action by the shareholders, to divide its unissued capital stock into
one or more classes and one or more series within any class and to make
determinations of the designation and number of shares of any class or series
and determinations of the voting rights, preferences, limitations and special
rights, if any, of the shares of any class or series. The rights, preferences,
limitations and special rights of different classes of capital stock may differ
with respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions and other
matters.
$3.25 preferred stock
Holders of the $3.25 preferred stock are entitled to receive, when, as
and if declared by the Board of Directors, out of the funds of Alkermes legally
available therefor, cash dividends at an annual rate of $3.25 per share of $3.25
preferred stock, payable in equal quarterly installments on March 1, June 1,
September 1 and December 1, commencing June 1, 1998. Each share of $3.25
preferred stock is convertible at the option of the holder at any time into such
number of shares of common stock determined by dividing the liquidation
preference of the $3.25 preferred stock (currently $50 per share) by the
conversion rate (currently 1.6878). The $3.25 preferred stock is not subject to
any sinking fund or other obligation of Alkermes to redeem or retire the $3.25
preferred stock. Unless earlier converted, exchanged or redeemed by us, the
$3.25 preferred stock has a perpetual maturity. The $3.25 preferred stock is not
redeemable by us prior to March 6, 2001. At any time on or after that date the
shares of $3.25 preferred stock may be redeemed at our option, out of funds
legally available therefor. The $3.25 preferred stock is exchangeable in whole,
but not in part, at our option, for 6 1/2% Convertible Subordinated Debentures
on any dividend payment date beginning March 1, 1999 at the rate of $50
principal amount of debentures for each share of $3.25 preferred stock
outstanding at the time of exchange. We are currently considering various
alternatives designed to effect an early conversion of our $3.25 preferred stock
into common stock. We have not reached any conclusions on whether we will
proceed with any of these alternatives. The holders of the $3.25 preferred stock
have no voting rights except with respect to certain additional stock issuances
or as required by law. In exercising any such vote, each outstanding share of
$3.25 preferred stock will be entitled to one vote, excluding shares held by us
or any of our affiliates, which shares shall have no voting rights.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of Alkermes, before any distribution of assets is made to holders
of the common stock or any other stock of Alkermes ranking junior to the shares
of $3.25 preferred stock upon liquidation, dissolution or winding up, the
holders of $3.25 preferred stock shall receive a liquidation preference of $50
per share and shall be entitled to receive all accrued and unpaid dividends
through the date of distribution, and the holders of any class or series of
$3.25 preferred stock ranking on a parity with the $3.25 preferred stock as to
liquidation, dissolution or winding up shall be entitled to receive the full
respective liquidation preferences (including any premium) to which they are
entitled and shall receive all accrued and unpaid dividends with respect to
their respective shares through and including the date of distribution. If, upon
such a voluntary or involuntary liquidation, dissolution or winding up of
Alkermes, the assets of Alkermes are insufficient to pay in full the amounts
described above as payable with respect to the $3.25 preferred stock and any
class or series of preferred stock of Alkermes ranking on a parity with the
$3.25 preferred stock as to liquidation, dissolution or winding up, the holders
of the $3.25 preferred stock and of such other class or series of preferred
stock will share ratably in any such distributions of assets of Alkermes first
in proportion to their respective liquidation preferences until such preferences
are paid in full, and then in proportion to their respective amounts of accrued
but unpaid dividends. After payment of any such liquidation preference and
accrued dividends, the shares of $3.25 preferred stock will not be entitled to
any further participation in any distribution of assets by Alkermes. Neither the
sale of all or
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substantially all of the assets of Alkermes, nor the merger or
consolidation of Alkermes into or with any other corporation, nor any
liquidation, dissolution, winding up or reorganization of Alkermes immediately
followed by reincorporation of another corporation, will be deemed to be a
liquidation, dissolution or winding up of Alkermes.
1999 PREFERRED STOCK
Holders of the 1999 preferred stock are entitled to receive, when, as
and if declared by the Board of Directors, out of the funds of Alkermes legally
available therefor, cash dividends at a floating three-month LIBOR rate, payable
in quarterly installments on March 1, June 1, September 1 and December 1,
commencing June 1, 1999. If, during any given period, the closing price of the
common stock is above $45 per share for at least 10 consecutive trading days,
each share of 1999 preferred stock is convertible at the option of the holder
into shares of non-voting common stock or common stock determined by an
established formula. The 1999 preferred stock is not subject to any sinking
fund. Prior to January 1, 2009, we can redeem the 1999 preferred stock at the
redemption price of $10,000 per share plus accrued and unpaid dividends. We are
required to redeem the 1999 preferred stock on January 1, 2009. The 1999
preferred stock is exchangeable in whole, but not in part, at our option, for
redeemable convertible subordinated debentures on any dividend payment date
beginning June 1, 1999 at the rate of $10,000 principal amount of debentures for
each share of 1999 preferred stock outstanding at the time of exchange. The
holders of the 1999 preferred stock have no voting rights except with respect to
certain additional stock issuances or as required by law. In exercising any such
vote, each outstanding share of 1999 preferred stock will be entitled to one
vote, excluding shares held by us or any of our affiliates, which shares shall
have no voting rights.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of Alkermes, before any distribution of assets is made to holders
of the common stock or any other stock of Alkermes ranking junior to the shares
of 1999 preferred stock upon liquidation, dissolution or winding up, the holders
of 1999 preferred stock shall receive a liquidation preference of $10,000 per
share and shall be entitled to receive all accrued and unpaid dividends through
the date of distribution, and the holders of any class or series of 1999
preferred stock ranking on a parity with the 1999 preferred stock as to
liquidation, dissolution or winding up shall be entitled to receive the full
respective liquidation preferences (including any premium) to which they are
entitled and shall receive all accrued and unpaid dividends with respect to
their respective shares through and including the date of distribution. If, upon
such a voluntary or involuntary liquidation, dissolution or winding up of
Alkermes, the assets of Alkermes are insufficient to pay in full the amounts
described above as payable with respect to the 1999 preferred stock and any
class or series of preferred stock of Alkermes ranking on a parity with the 1999
preferred stock as to liquidation, dissolution or winding up, the holders of the
1999 preferred stock and of such other class or series of preferred stock will
share ratably in any such distributions of assets of Alkermes first in
proportion to their respective liquidation preferences until such preferences
are paid in full, and then in proportion to their respective amounts of accrued
but unpaid dividends. After payment of any such liquidation preference and
accrued dividends, the shares of 1999 preferred stock will not be entitled to
any further participation in any distribution of assets by Alkermes. Neither the
sale of all or substantially all of the assets of Alkermes, nor the merger or
consolidation of Alkermes into or with any other corporation, nor any
liquidation, dissolution, winding up or reorganization of Alkermes immediately
followed by reincorporation of another corporation, will be deemed to be a
liquidation, dissolution or winding up of Alkermes.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock and the $3.25
preferred stock is EquiServe Limited Partnership.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the material United States federal income tax
consequences of purchasing, owning and disposing of the notes and the common
stock into which you may convert the notes. This summary is not a complete
analysis of all the potential tax consequences that you may need to consider
before investing based on your particular circumstances.
This summary is based on the Internal Revenue Code, the applicable
Treasury regulations promulgated or proposed under the Internal Revenue Code,
judicial authority and administrative rulings. Any of these may change, possibly
on a retroactive basis.
This summary deals only with beneficial owners of notes or common stock
who acquire the notes in this offering and hold the notes or common stock as
"capital assets." It does not address tax consequences under any special tax
rules. Special rules may apply, for example, to banks, tax-exempt organizations,
pension funds, insurance companies, dealers in securities or foreign currencies,
persons participating in a hedging transaction or a "straddle" or "conversion
transaction," or persons that have a "functional currency" other than the U.S.
dollar. In addition, this discussion does not address the tax consequences to
non-U.S. holders. We have not sought any ruling from the IRS with respect to the
statements and conclusions in this summary. We cannot guarantee that the IRS
will agree with these statements and conclusions.
Before you invest in the notes, you should consult your own tax adviser
to determine how the United States federal income tax laws apply to your
particular situation and for information about any tax consequences arising
under other tax laws, such as United States federal estate tax laws and the laws
of any state, local or foreign taxing jurisdiction or under any applicable tax
treaty.
This summary applies to you if you are a U.S. holder. For purposes of
this discussion, the term "U.S. holder" means a beneficial owner of a note or
common stock that is for United States federal income tax purposes:
- a citizen or resident of the United States,
- a corporation or other entity created or organized
in or under the laws of the United States or any
political subdivision thereof, or
- an estate or trust, the income of which is subject
to United States federal income taxation regardless
of its source.
If a partnership holds notes or common stock, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. Partners of partnerships holding notes or common
stock should consult their tax advisers.
PAYMENT OF INTEREST
You generally must include interest on the notes in your income as
ordinary income at the time you receive or accrue the interest based on your
method of accounting for United States federal income tax purposes. We must pay
liquidated damages to you in specified circumstances. According to Treasury
regulations, the possibility of liquidated damages being paid to you will not
affect the amount of interest income you recognize, in advance of the payment of
any liquidated damages, if there is only a remote chance as of the date the
notes were issued that you will receive liquidated damages. We believe that the
likelihood that we will pay liquidated damages is remote. Therefore, we do not
intend to treat the potential payment of liquidated damages as part of the yield
to maturity of any notes. If we pay you
43
<PAGE> 46
liquidated damages, however, you would treat the payments as interest income
when you receive them. Similarly, we intend to take the position that the
likelihood of a redemption or repurchase of the notes is remote, and likewise do
not intend to treat the possibility of any premium payable on a redemption or
repurchase as affecting the yield to maturity of any notes.
SALE, EXCHANGE OR REDEMPTION OF NOTES
You generally will recognize gain or loss on the sale, exchange (other
than a conversion) or redemption of notes equal to the difference between (1)
the amount of cash proceeds and the fair market value of any property you
receive on the sale, exchange or redemption (except any portion that is accrued
interest income, which is taxable as ordinary income) and (2) your adjusted tax
basis in the notes. Your adjusted tax basis generally will equal the cost of the
notes to you. Your gain or loss generally will be capital gain or loss. Capital
gain or loss will be long-term if you have held the notes for more than one year
and will be short-term if you have held the notes for one year or less.
Long-term capital gains for noncorporate taxpayers, including individuals, are
taxed at a maximum rate of 20%, and short-term capital gains at a maximum rate
of 39.6%. If you recognize capital loss, your deduction for the loss may be
limited. Corporate taxpayers pay a maximum regular tax rate of 35% on all net
capital gains and ordinary income.
CONVERSION OF NOTES
You generally will not recognize any income, gain or loss on the
conversion of notes into common stock, except for any cash you receive instead
of a fractional share of common stock as described below. Any gain so recognized
will generally be capital gain. Your tax basis in the common stock will be the
same as your adjusted tax basis in the notes at the time of conversion, reduced
by any basis attributable to fractional shares. For capital gains purposes, your
holding period for the common stock will generally include your holding period
for the notes you converted.
You should treat cash you receive instead of a fractional share of common
stock as a payment in exchange for the fractional share of common stock. This
will result in capital gain or loss (measured by the difference between the cash
you receive for the fractional share and your adjusted tax basis in the
fractional share).
DIVIDENDS ON COMMON STOCK
If we make a distribution on common stock (probably including any
liquidated damages), the distribution generally will be treated as a dividend
and taxed as ordinary income to the extent of our current and/or accumulated
earnings and profits. A distribution in excess of earnings and profits is
treated as a tax-free return of capital to the extent of your tax basis in the
common stock, on a share-by-share basis, and then as gain from the sale or
exchange of such stock.
A dividend to a corporate holder may qualify for a deduction of 70% of
the dividend received, subject to limitations in certain cases, if the holder
owns less than 20% of the voting power or value of our stock (disregarding
certain nonvoting, nonconvertible, nonparticipating preferred stock). A
corporate holder that owns 20% or more of the voting power and value of our
stock (similarly disregarding such preferred stock) generally will qualify for
an 80% dividends received deduction.
ADJUSTMENTS TO CONVERSION PRICE
The conversion price of the notes may change under certain
circumstances. In such a case, you may be treated as having received a
constructive distribution whether or not your notes are ever converted. Such a
distribution will generally be deemed to occur if, and to the extent that, the
adjustment in the conversion price increases your proportionate interest in our
assets or earnings and profits. The
44
<PAGE> 47
constructive distribution may be taxed as ordinary income, subject to a possible
dividends received deduction if you are a corporate holder, to the extent of our
current and/or accumulated earnings and profits. For example, an adjustment to
reflect a taxable dividend to holders of common stock will result in a
constructive dividend. Holders who have converted their notes into common stock
will generally be treated as having received a constructive distribution if
there is not a full adjustment to the conversion price of the notes to reflect a
stock dividend or other event that would (absent such adjustment) increase the
proportionate interest of the common stockholders in our assets or earnings and
profits. In such an event, the constructive distribution will be taxable as
ordinary income, subject to a possible dividends received deduction if you are a
corporate holder, to the extent of our current and/or accumulated earnings and
profits.
SALE OF COMMON STOCK
On the sale or exchange of common stock, you generally will recognize
capital gain or loss equal to the difference between (1) the amount of cash and
the fair market value of any property you receive on the sale or exchange and
(2) your adjusted tax basis in the common stock. This capital gain or loss will
be long-term if you have held the stock for more than one year and will be
short-term if you have held the stock for one year or less. Long-term capital
gains for noncorporate taxpayers, including individuals, are taxed at a maximum
stated rate of 20%, and short-term capital gains at a maximum stated rate of
39.6%. A holder's basis and holding period in common stock received upon
conversion of notes are determined as discussed above under "Conversion of
Notes." If you recognize capital loss, your deduction for the loss may be
limited. Corporate taxpayers pay a maximum regular stated tax rate of 35% on all
net capital gains and ordinary income.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, the payer or broker must report to the IRS payments of
principal, premium and interest on notes, payments of dividends on common stock,
payments of the proceeds of the sale or exchange of notes, and payments of the
proceeds of the sale or exchange of common stock. The payer or broker must
backup withhold at the rate of 31% if:
- you fail to furnish a taxpayer identification number
to the payer or broker or establish an exemption
from backup withholding;
- the IRS notifies the payer or broker that the number
you furnished is incorrect;
- you have underreported interest or dividends; or
- you have failed to certify under penalties of
perjury that you are not subject to backup
withholding under the Internal Revenue Code.
Some holders, including all corporations, are exempt from backup
withholding. You may credit any amounts withheld under the backup withholding
rules against your United States federal income tax liability, or receive a
refund, if you furnish the required information to the IRS.
Treasury regulations that apply to payments made after December 31,
2000 will modify current information reporting and backup withholding procedures
and requirements. These regulations provide certain presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payer. For payments made after
December 31, 2000, holders must provide certification, if applicable, that
conforms to the requirements of the regulations, subject to certain transitional
rules permitting certification in accordance with current Treasury regulations
until December 31, 2000. Because the application of these regulations may depend
on your particular circumstances, we urge you to consult your tax adviser
regarding the application of these regulations.
45
<PAGE> 48
SELLING SECURITYHOLDERS
We originally issued the notes in transactions exempt from the
registration requirements of the Securities Act to persons that the initial
purchasers believed to be qualified institutional buyers. As used in this
prospectus, the term selling securityholders includes their transferees,
pledges, donees and their successors. The selling securityholders may from time
to time offer and sell pursuant to this prospectus any or all of the notes and
the shares of common stock initially issued or issuable upon conversion of the
notes, if issued.
The following table sets forth information regarding (1) the beneficial
ownership of the notes and the maximum principal amount of the notes that each
selling securityholder may offer and (2) the number of shares of common stock
that each selling securityholder may sell under this prospectus. Because the
selling securityholders may offer all or a portion of the notes and the common
stock, if converted, under this prospectus, we cannot estimate the amount of
notes or the common stock that the selling securityholders will hold upon
termination of any sale. The following table is based upon information furnished
to us by the selling securityholders.
<TABLE>
<CAPTION>
Principal Amounts Number of Shares of Common Stock
Name of of Notes Beneficially Owned and Issued Upon Conversion of the Notes
Selling Securityholder Offered that May be Offered
<S> <C> <C>
JMG Capital Partner, LP $ 1,500,000 11,070
All other holders 248,500,000 1,833,948
Total $250,000,000 1,845,018
</TABLE>
46
<PAGE> 49
PLAN OF DISTRIBUTION FOR THE RESALE OF THE SECURITIES
A selling securityholder may from time to time, in one or more
transactions, sell all or a portion of the securities in negotiated
transactions, in underwritten transactions or otherwise or, with respect to the
common stock, on the Nasdaq National Market, at prices then prevailing or
related to the then current market price or at negotiated prices. The offering
price of the securities from time to time will be determined by a selling
securityholder, and, with respect to the common stock, at the time of such
determination, may be higher or lower than the market price of our common stock
on the Nasdaq National Market. The securities may be sold directly or through
broker-dealers acting as principal or agent. The methods by which the securities
may be sold include:
- a block trade in which the broker-dealer so engaged
will attempt to sell the securities as agent but may
position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale
by such broker-dealer for its account pursuant to
this prospectus;
- ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and
- privately negotiated transactions.
In effecting sales, brokers or dealers engaged by a selling
securityholder may arrange for other brokers or dealers to participate. These
brokers or dealers may receive commissions or discounts from a selling
securityholder as applicable, in amounts to be negotiated immediately prior to
the sale. A selling securityholder and any underwriters, dealers or agents
participating in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit on the
sale of the securities by a selling securityholder and any commissions received
by any broker-dealers may be deemed to be underwriting commissions under the
Securities Act. In addition, any securities covered by this prospectus that
qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather than
pursuant to this prospectus.
Additionally, in connection with the sale of the securities, a selling
securityholder may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the securities in the course of
hedging the positions they assume with the selling securityholder. A selling
securityholder may also enter into option or other transactions with
broker-dealers that involve the delivery of the shares to the broker-dealers,
who may then resell or otherwise transfer the shares. A selling securityholder
may also loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the securities so loaned or upon a default may sell or otherwise transfer
the pledged securities.
When a selling securityholder elects to make a particular offer of
securities, we will distribute a prospectus supplement, if required, that will
identify any underwriters, dealers or agents and any discounts, commissions and
other terms constituting compensation from a selling securityholder, as
applicable, and any other required information.
In order to comply with the securities laws of certain states, if
applicable, the securities may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the securities may not be
sold unless they have been registered or qualified for sale in such state or an
exemption from such registration or qualification requirement is available and
is complied with.
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<PAGE> 50
We also have agreed to indemnify the selling securityholders in certain
circumstances, against certain liabilities arising under the Securities Act.
Each selling securityholder has agreed to indemnify us and our directors and
officers who sign the registration statement against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to pay all costs and expenses relating to the
registration of the securities (other than fees and expenses, if any, of counsel
or other advisors to the selling stockholders). Any commissions, discounts or
other fees payable to broker-dealers in connection with any sale of the
securities will be borne by the selling securityholder selling such shares.
All references to selling securityholders in this section of the
prospectus shall also be deemed to include any transferees, assignees and
pledgees of the selling securityholders.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
Alkermes by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania.
Morris Cheston, Jr., Secretary of Alkermes and of Alkermes Controlled
Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II, and ADC II, all of
which are wholly owned subsidiaries of Alkermes, and Martha J. Hays, Secretary
of Alkermes Investments, Inc., a wholly owned subsidiary of Alkermes, are
partners in the law firm of Ballard Spahr Andrews & Ingersoll, LLP.
EXPERTS
The consolidated financial statements of Alkermes, Inc. and
subsidiaries, incorporated in this prospectus by reference from our Annual
Report on Form 10-K for the year ended March 31, 1999, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report which is
incorporated herein by reference and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
48
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the amounts of expenses attributed to
the issuance of the securities offered pursuant to this Registration Statement
which shall be borne by Alkermes, Inc. All of the expenses listed below, except
the SEC registration fee and the Nasdaq Listing Fee, represent estimates only.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................................... $66,000
Nasdaq listing fee............................................................. 17,500
Printing and engraving expenses................................................ 10,000
Accounting fees and expenses................................................... 12,000
Legal fees and expenses........................................................ 25,000
Miscellaneous fees and expenses................................................ 4,500
--------
Total................................................................. $135,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Pennsylvania Business Corporation Law of 1988 authorizes Alkermes
to grant indemnities to directors and officers in terms sufficiently broad to
permit indemnification of such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933. In addition, Alkermes has also obtained Directors' and
Officers' Liability Insurance in the amount of $10,000,000 which insures its
officers and directors against certain liabilities such persons may incur in
their capacities as officers or directors of Alkermes.
Article 5 of Alkermes' Amended and Restated By-Laws provides as
follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS. The
Corporation shall indemnify any director, officer, employee or agent of the
Corporation or any of its subsidiaries who was or is an "authorized
representative" of the Corporation (which shall mean, for the purpose of this
Article, a director or officer of the Corporation, or a person serving at the
request of the Corporation as a director, officer, partner, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and who was or is a "party" (which shall include for
purposes of this Article the giving of testimony or similar involvement) or is
threatened to be made a party to any "proceeding" (which shall mean for purposes
of this Article any threatened, pending or completed action, suit, appeal or
other proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Corporation, its shareholders or otherwise) by reason of the fact
that such person was or is an authorized representative of the Corporation to
the fullest extent permitted by law, including without limitation
indemnification against expenses (which shall include for purposes of this
Article attorneys' fees and disbursements), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding unless the
act or failure to act giving rise to the claim is finally determined by a court
to have constituted willful misconduct or recklessness. If an authorized
representative is not entitled to indemnification in respect of a portion of
<PAGE> 52
any liabilities to which such person may be subject, the Corporation shall
nonetheless indemnify such person to the maximum extent for the remaining
portion of the liabilities.
5.2 ADVANCEMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
in defending a proceeding on behalf of any person entitled to indemnification
under Section 5.1 in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and may pay such
expenses in advance on behalf of any employee or agent on receipt of a similar
undertaking. The financial ability of such authorized representative to make
such repayment shall not be prerequisite to the making of an advance.
5.3 EMPLOYEE BENEFIT PLANS. For purposes of this Article, the
Corporation shall be deemed to have requested an officer, director, employee or
agent to serve as fiduciary with respect to an employee benefit plan where the
performance by such person of duties to the Corporation also imposes duties on,
or otherwise involves services by, such person as a fiduciary with respect to
the plan; excise taxes assessed on an authorized representative with respect to
any transaction with an employee benefit plan shall be deemed "fines"; and
action taken or omitted by such person with respect to an employee benefit plan
in the performance of duties for a purpose reasonably believed to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Corporation.
5.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect,
satisfy or secure the indemnification obligations provided herein or otherwise,
the Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate.
5.5 RELIANCE UPON PROVISIONS. Each person who shall act as an
authorized representative of the Corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided by this Article.
5.6 AMENDMENT OR REPEAL. All rights of indemnification under this
Article shall be deemed a contract between the Corporation and the person
entitled to indemnification under this Article pursuant to which the Corporation
and each such person intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not limit, but may
expand, any rights or obligations in respect of any proceeding whether commenced
prior to or after such change to the extent such proceeding pertains to actions
or failures to act occurring prior to such change.
5.7 SCOPE OF ARTICLE. The indemnification, as authorized by this
Article, shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in any
other capacity while holding such office. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall continue as to
a person who has ceased to be an officer, director, employee or agent in respect
of matters arising prior to such time, and shall inure to the benefit of the
heirs, executors and administrators of such person.
II-2
<PAGE> 53
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1(a) Second Amended and Restated Articles of Incorporation of
Alkermes, Inc. effective July 23, 1991. (Incorporated by
reference to Exhibit 4.1(a) to the Registrant's Report on
Form 10-Q for the quarter ended June 30, 1991).
3.1(b) Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on November 1, 1991. (Incorporated by reference to
Exhibit 4.1(c) to the Registrant's Report on Form 10-Q for
the quarter ended September 30, 1991).
3.1(c) Amendment to the Second Amended and Restated Articles of
Incorporation, as amended, as filed with the Pennsylvania
Secretary of State on February 12, 1993. (Incorporated by
reference to Exhibit 4.1(d) to the Registrant's Report on
Form 10-Q for the quarter ended December 31, 1992).
3.1(d)(I) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on February 26, 1998 (designating 3,000,000 shares of
Capital Stock as Preferred Stock). (Incorporated by reference
to Exhibit 3.1(e)(I) to the Registrant's Report on Form 10-Q
for the quarter ended September 30, 1999.)
3.1(d)(II) Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on February 26, 1998 ($3.25 Convertible Preferred Stock
Terms). (Incorporated by reference to Exhibit 4.6 to the
Registrant's Registration Statement on Form S-3, as amended
(File No. 333-50157)).
3.1(f) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on April 12, 1999 (1999 Preferred Stock Terms).
(Incorporated by reference to Exhibit 3.1(f) to the Company's
Report on Form 10-K for the year ended March 31, 1999).
3.1(g) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on April 12, 1999 (Non-Voting Common Stock Terms).
(Incorporated by reference to Exhibit 3.1(g) to the Company's
Report on Form 10-K for the year ended March 31, 1999).
3.1(h) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on September 20, 1999 (increasing authorized Common
Stock to 80,000,000 shares). (Incorporated by reference to
Exhibit 3.1(h) to the Company's Report on Form 10-Q for the
quarter ended September 30, 1999).
3.2 Amended and Restated By-Laws of Alkermes, Inc., effective as
of June 2, 1999. (Incorporated by reference to Exhibit 3.2 to
the Company's Report on Form 10-K for the year ended March
31, 1999).
4.1 Specimen of Common Stock Certificate of Alkermes, Inc.
(Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-1 as amended (File No.
33-40250)).
4.2 Specimen of $3.25 Convertible Preferred Stock Certificate of
Alkermes, Inc. (Incorporated by reference to Exhibit 4.1 to
the Registrant's Registration Statement on Form S-3, as
amended (File No. 333-50157)).
4.3 Specimen of 1999 Preferred Stock Certificate of Alkermes,
Inc. (Incorporated by reference to Exhibit 4.3 to the
Company's Report on Form 10-K for the fiscal year ended March
31, 1999).
4.4 Specimen of Non-Voting Common Stock Certificate of Alkermes,
Inc. (Incorporated by reference to Exhibit 4.4 to the
Company's Report on Form 10-K for the fiscal year ended March
31, 1999).
</TABLE>
II-3
<PAGE> 54
'
<TABLE>
<CAPTION>
<S> <C>
4.5 Indenture, dated as of March 1, 1998, between Alkermes, Inc.
and State Street Bank and Trust Company, as Trustee
(Incorporated by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-3, as amended (File No.
333-50157)).
4.6* Indenture, dated as of February 18, 2000, between Alkermes,
Inc. and State Street Bank and Trust Company, as Trustee.
4.6(a)* Form of 3 3/4% Convertible Subordinated Note due 2007
(included as Exhibit A to Exhibit 4.6).
4.7* Purchase Agreement, dated as of February 15, 2000, among
Alkermes, Inc. and FleetBoston Robertson Stephens Inc., Adams
Harkness & Hill, Inc., ING Barings LLC, J.P. Morgan
Securities Inc., PaineWebber Incorporated, SG Cowen
Securities Corporation and U.S. Bancorp Piper Jaffray Inc.
4.8* Registration Rights Agreement, dated as of February 18, 2000,
among Alkermes, Inc. and FleetBoston Robertson Stephens Inc.,
Adams Harkness & Hill, Inc., ING Barings LLC, J.P. Morgan
Securities Inc., PaineWebber Incorporated, SG Cowen
Securities Corporation and U.S. Bancorp Piper Jaffray Inc.
5* Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
12* Statement re computation of ratios.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained
in Exhibit 5).
24* Power of Attorney (included on signature page).
25* Form T-1 Statement of Eligibility and Qualification of
Trustee.
- ---------------
* filed herewith
</TABLE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being made,
a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
II-4
<PAGE> 55
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cambridge, Commonwealth of Massachusetts, on February
29, 2000.
ALKERMES, INC.
By: /s/ Richard F. Pops
-----------------------
Richard F. Pops
Chief Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard F. Pops, Robert A. Breyer and James M.
Frates and each or any one of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement and any
registration statement relating to any offering made pursuant to this
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
--------------- Director and Chairman of the Board -----------, 2000
Michael A. Wall
/s/ Richard F. Pops Director and Chief Executive Officer February 29, 2000
------------------- (Principal Executive Officer)
Richard F. Pops
/s/ Robert A. Breyer Director, President and Chief February 29, 2000
-------------------- Operating Officer
Robert A. Breyer
/s/ James M. Frates Vice President, Chief Financial February 29, 2000
------------------- Officer and Treasurer (Principal
James M. Frates Financial Officer and Principal
Accounting Officer)
/s/ Alexander Rich Director February 29, 2000
------------------
Alexander Rich
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Paul Schimmel Director February 29, 2000
-----------------
Paul Schimmel
/s/ Floyd Bloom Director February 29, 2000
---------------
Floyd Bloom
/s/ John K. Clarke Director February 29, 2000
------------------
John K. Clarke
</TABLE>
<PAGE> 58
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
3.1(a) Second Amended and Restated Articles of Incorporation of
Alkermes, Inc. effective July 23, 1991. (Incorporated by
reference to Exhibit 4.1(a) to the Registrant's Report on Form
10-Q for the quarter ended June 30, 1991).
3.1(b) Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on November 1, 1991. (Incorporated by reference to
Exhibit 4.1(c) to the Registrant's Report on Form 10-Q for the
quarter ended September 30, 1991).
3.1(c) Amendment to the Second Amended and Restated Articles of
Incorporation, as amended, as filed with the Pennsylvania
Secretary of State on February 12, 1993. (Incorporated by
reference to Exhibit 4.1(d) to the Registrant's Report on Form
10-Q for the quarter ended December 31, 1992).
3.1(d)(I) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on February 26, 1998 (designating 3,000,000 shares of
Capital Stock as Preferred Stock). (Incorporated by reference
to Exhibit 3.1(e)(I) to the Registrant's Report on Form 10-Q
for the quarter ended September 30, 1999.
3.1(d)(II) Amendment to Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on February 26, 1998 ($3.25 Convertible Preferred Stock
Terms). (Incorporated by reference to Exhibit 4.6 to the
Registrant's Registration Statement on Form S-3, as amended
(File No. 333-50157)).
3.1(f) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on April 12, 1999 (1999 Preferred Stock Terms).
(Incorporated by reference to Exhibit 3.1(f) to the Company's
Report on Form 10-K for the year ended March 31, 1999).
3.1(g) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on April 12, 1999 (Non-Voting Common Stock Terms).
(Incorporated by reference to Exhibit 3.1(g) to the Company's
Report on Form 10-K for the year ended March 31, 1999).
3.1(h) Amendment to the Second Amended and Restated Articles of
Incorporation, as filed with the Pennsylvania Secretary of
State on September 20, 1999 (increasing authorized Common Stock
to 80,000,000 shares). (Incorporated by reference to Exhibit
3.1(h) to the Company's Report on Form 10-Q for the quarter
ended September 30, 1999).
3.2 Amended and Restated By-Laws of Alkermes, Inc., effective as of
June 2, 1999. (Incorporated by reference to Exhibit 3.2 to the
Company's Report on Form 10-K for the year ended March 31,
1999).
4.1 Specimen of Common Stock Certificate of Alkermes, Inc.
(Incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-1 as amended (File No.
33-40250)).
4.2 Specimen of $3.25 Convertible Preferred Stock Certificate of
Alkermes, Inc. (Incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3, as amended
(File No. 333-50157)).
4.3 Specimen of 1999 Preferred Stock Certificate of Alkermes, Inc.
(Incorporated by reference to Exhibit 4.3 to the Company's
Report on Form 10-K for the fiscal year ended March 31, 1999).
4.4 Specimen of Non-Voting Common Stock Certificate of Alkermes,
Inc. (Incorporated by reference to Exhibit 4.4 to the Company's
Report on Form 10-K for the fiscal year ended March 31, 1999).
<PAGE> 59
4.5 Indenture, dated as of March 1, 1998, between Alkermes, Inc.
and State Street Bank and Trust Company, as Trustee
(Incorporated by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-3, as amended (File No.
333-50157)).
4.6* Indenture, dated as of February 18, 2000, between Alkermes,
Inc. and State Street Bank and Trust Company, as Trustee.
4.6(a)* Form of 3 3/4% Convertible Subordinated Note due 2007
(included as Exhibit A to Exhibit 4.6).
4.7* Purchase Agreement, dated as of February 15, 2000, among
Alkermes, Inc. and FleetBoston Robertson Stephens Inc., Adams
Harkness & Hill, Inc., ING Barings LLC, J.P. Morgan Securities
Inc., PaineWebber Incorporated, SG Cowen Securities Corporation
and U.S. Bancorp Piper Jaffray Inc.
4.8* Registration Rights Agreement, dated as of February 18, 2000,
among Alkermes, Inc. and FleetBoston Robertson Stephens Inc.,
Adams Harkness & Hill, Inc., ING Barings LLC, J.P. Morgan
Securities Inc., PaineWebber Incorporated, SG Cowen Securities
Corporation and U.S. Bancorp Piper Jaffray Inc.
5* Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
12* Statement re computation of ratios.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in
Exhibit 5).
24* Power of Attorney (included on signature page).
25* Form T-1 Statement of Eligibility and Qualification of Trustee.
- ------------
* filed herewith
<PAGE> 1
EXHIBIT 4.6
ALKERMES, INC.
as Issuer
AND
STATE STREET BANK AND TRUST COMPANY
as Trustee
INDENTURE
Dated as of February 18, 2000
3-3/4% Convertible Subordinated Notes due 2007
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. DEFINITIONS ................................................. 2
Section 1.1. Definitions ............................................... 2
ARTICLE II. ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES ...................................... 9
Section 2.1. Designation, Amount and Issue of Notes .................... 9
Section 2.2. Form of Notes ............................................. 9
Section 2.3. Date and Denomination of Notes; Payments of Interest ...... 10
Section 2.4. Execution of Notes ........................................ 11
Section 2.5. Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary ...................... 12
Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes ................ 19
Section 2.7. Temporary Notes ........................................... 20
Section 2.8. Cancellation of Notes Paid, Etc ........................... 20
Section 2.9. CUSIP Numbers ............................................. 21
ARTICLE III. REDEMPTION OF NOTES ....................................... 21
Section 3.1. Redemption Prices ......................................... 21
Section 3.2. Notice of Redemption; Selection of Notes .................. 22
Section 3.3. Payment of Notes Called for Redemption .................... 23
Section 3.4. Conversion Arrangement on Call for Redemption ............. 24
ARTICLE IV. SUBORDINATION OF NOTES ..................................... 25
Section 4.1. Agreement of Subordination ................................ 25
Section 4.2. Payments to Noteholders ................................... 25
Section 4.3. Bankruptcy and Dissolution, Etc ........................... 26
Section 4.4. Subrogation of Notes ...................................... 28
Section 4.5. Authorization by Noteholders .............................. 29
Section 4.6. Notice to Trustee ......................................... 29
Section 4.7. Trustee's Relation to Senior Indebtedness ................. 30
Section 4.8. No Impairment of Subordination ............................ 30
Section 4.9. Certain Conversions Deemed Payment ........................ 30
Section 4.10. Article Applicable to Paying Agents ...................... 31
ARTICLE V. PARTICULAR COVENANTS OF THE COMPANY ......................... 31
Section 5.1. Payment of Principal, Premium and Interest ................ 31
Section 5.2. Maintenance of Office or Agency ........................... 31
Section 5.3. Appointments to Fill Vacancies in Trustee's Office ........ 32
Section 5.4. Provisions as to Paying Agent ............................. 32
Section 5.5. Existence ................................................. 33
Section 5.6. Rule 144A Information Requirement ......................... 33
Section 5.7. Stay, Extension and Usury Laws ............................ 34
Section 5.8. Compliance Certificate .................................... 34
</TABLE>
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<TABLE>
<S> <C>
Section 5.9. Liquidated Damages ........................................ 34
Section 5.10. Further Instruments and Acts ............................. 34
ARTICLE VI. NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND
THE TRUSTEE ................................................ 34
Section 6.1. Noteholders' Lists ........................................ 34
Section 6.2. Preservation and Disclosure of Lists ...................... 35
Section 6.3. Reports by Trustee ........................................ 35
Section 6.4. Reports by Company ........................................ 35
ARTICLE VII. DEFAULTS AND REMEDIES ..................................... 36
Section 7.1. Events of Default ......................................... 36
Section 7.2. Payments of Notes on Default; Suit Therefor ............... 38
Section 7.3. Application of Monies Collected by Trustee ................ 40
Section 7.4. Proceedings by Noteholder ................................. 41
Section 7.5. Proceedings by Trustee .................................... 41
Section 7.6. Remedies Cumulative and Continuing ........................ 42
Section 7.7. Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders ................................... 42
Section 7.8. Notice of Defaults ........................................ 42
Section 7.9. Undertaking to Pay Costs .................................. 43
Section 7.10. Delay or Omission Not Waiver ............................. 43
ARTICLE VIII. CONCERNING THE TRUSTEE ................................... 43
Section 8.1. Duties and Responsibilities of Trustee .................... 43
Section 8.2. Reliance on Documents, Opinions, Etc ...................... 44
Section 8.3. No Responsibility for Recitals, Etc ....................... 45
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar
May Own Notes ............................................. 46
Section 8.5. Monies to Be Held in Trust ................................ 46
Section 8.6. Compensation and Expenses of Trustee ...................... 46
Section 8.7. Officers' Certificate as Evidence ......................... 46
Section 8.8. Conflicting Interests of Trustee .......................... 47
Section 8.9. Eligibility of Trustee .................................... 47
Section 8.10. Resignation or Removal of Trustee ........................ 47
Section 8.11. Acceptance by Successor Trustee .......................... 48
Section 8.12. Succession by Merger, Etc ................................ 49
Section 8.13. Limitation on Rights of Trustee as Creditor .............. 49
ARTICLE IX. CONCERNING THE NOTEHOLDERS ................................. 50
Section 9.1. Action by Noteholders ..................................... 50
Section 9.2. Proof of Execution by Noteholders ......................... 50
Section 9.3. Who Are Deemed Absolute Owners ............................ 50
Section 9.4. Company-Owned Notes Disregarded ........................... 50
Section 9.5. Revocation of Consents; Future Holders Bound .............. 51
ARTICLE X. NOTEHOLDERS' MEETINGS ....................................... 51
Section 10.1. Purpose of Meetings ...................................... 51
Section 10.2. Call of Meetings by Trustee .............................. 52
</TABLE>
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<TABLE>
<S> <C>
Section 10.3. Call of Meetings by Company or Noteholders ............... 52
Section 10.4. Qualifications for Voting ................................ 52
Section 10.5. Regulations .............................................. 52
Section 10.6. Voting ................................................... 53
Section 10.7. No Delay of Rights by Meeting ............................ 53
ARTICLE XI. SUPPLEMENTAL INDENTURES .................................... 54
Section 11.1. Supplemental Indentures Without Consent of Noteholders ... 54
Section 11.2. Supplemental Indentures With Consent of Noteholders ...... 55
Section 11.3. Effect of Supplemental Indentures ........................ 56
Section 11.4. Notation on Notes ........................................ 56
Section 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee ........................................ 56
ARTICLE XII. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE ......... 56
Section 12.1. Company May Consolidate, Etc. on Certain Terms ........... 56
Section 12.2. Successor Corporation to Be Substituted .................. 57
Section 12.3. Opinion of Counsel to Be Given Trustee ................... 58
ARTICLE XIII. SATISFACTION AND DISCHARGE OF INDENTURE .................. 58
Section 13.1. Discharge of Indenture ................................... 58
Section 13.2. Deposited Monies to Be Held in Trust by Trustee .......... 59
Section 13.3. Paying Agent to Repay Monies Held ........................ 59
Section 13.4. Return of Unclaimed Monies ............................... 59
Section 13.5. Reinstatement ............................................ 59
ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS ................................................. 59
Section 14.1. Indenture and Notes Solely Corporate Obligations ......... 59
ARTICLE XV. CONVERSION OF NOTES ........................................ 60
Section 15.1. Right to Convert ......................................... 60
Section 15.2. Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends ... 60
Section 15.3. Cash Payments in Lieu of Fractional Shares ............... 62
Section 15.4. Conversion Price ......................................... 62
Section 15.5. Adjustment of Conversion Price ........................... 62
Section 15.6. Effect of Reclassification, Consolidation, Merger or Sale 72
Section 15.7. Taxes on Shares Issued ................................... 73
Section 15.8. Reservation of Shares; Shares to Be Fully Paid; Listing
of Common Stock .......................................... 73
Section 15.9. Responsibility of Trustee ................................ 74
Section 15.10. Notice to Holders Prior to Certain Actions .............. 74
ARTICLE XVI. REPURCHASE UPON A REPURCHASE EVENT ........................ 76
Section 16.1. Repurchase Right ......................................... 76
Section 16.2. Notices; Method of Exercising Repurchase Right, Etc ...... 76
Section 16.3. Conditions to the Company's Election to Pay the Repurchase
Price in Common Stock .................................... 79
</TABLE>
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<TABLE>
<S> <C>
Section 16.4. Certain Definitions ...................................... 80
ARTICLE XVII. MISCELLANEOUS PROVISIONS ................................. 81
Section 17.1. Provisions Binding on Company's Successors ............... 81
Section 17.2. Official Acts by Successor Corporation ................... 81
Section 17.3. Addresses for Notices, Etc ............................... 81
Section 17.4. Governing Law ............................................ 82
Section 17.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee .................................. 82
Section 17.6. Legal Holidays ........................................... 82
Section 17.7. No Security Interest Created ............................. 82
Section 17.8. Trust Indenture Act ...................................... 82
Section 17.9. Benefits of Indenture .................................... 83
Section 17.10. Table of Contents, Headings, Etc ........................ 83
Section 17.11. Authenticating Agent .................................... 83
Section 17.12. Execution in Counterparts ............................... 84
</TABLE>
iv
<PAGE> 6
INDENTURE dated as of February 18, 2000 between Alkermes, Inc., a
Pennsylvania corporation as issuer (hereinafter sometimes called the "Company",
as more fully set forth in Section 1.1), and State Street Bank and Trust
Company, a trust company organized under the laws of the Commonwealth of
Massachusetts as trustee (hereinafter sometimes called the "Trustee", as more
fully set forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its 3-3/4% Convertible Subordinated Notes due 2007
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $200,000,000 ($250,000,000 if the option to purchase additional Notes
granted to the Initial Purchasers (as defined herein) pursuant to the Purchase
Agreement (as defined herein) is exercised in full) and in order to provide the
terms and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company has duly authorized the execution and delivery of this
Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Repurchase Event (as defined herein), a form of conversion notice and a
certificate of transfer to be borne by the Notes are to be substantially in the
forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
<PAGE> 7
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise requires) shall
have the meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of the execution of this Indenture. The
words "herein," "hereof," "hereunder," and words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
Subdivision. The terms defined in this Article include the plural as well as the
singular.
Affiliate: The term "Affiliate" of any specified person shall mean any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Board of Directors: The term "Board of Directors" shall mean the Board
of Directors of the Company or a committee of such Board duly authorized to act
for it hereunder.
Board Resolution: The term "Board Resolution" means a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by the Board of Directors, or duly authorized
committee thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
Business Day: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
Change in Control: The term "Change in Control" shall have the meaning
specified in Section 16.4.
close of business: The term "close of business" means 5 p.m. (New York
City time).
Commission: The term "Commission" shall mean the Securities and
Exchange Commission.
2
<PAGE> 8
Common Stock: The term "Common Stock" shall mean any stock of any class
of the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company; provided
that if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Company: The term "Company" shall mean Alkermes, Inc., a Pennsylvania
corporation, and subject to the provisions of Article XII, shall include its
successors and assigns.
Company Notice: The term "Company Notice" shall have the meaning
specified in Section 16.2.
Conversion Price: The term "Conversion Price" shall have the meaning
specified in Section 15.4.
Corporate Trust Office: The term "Corporate Trust Office," or other
similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at 2 Avenue
de Lafayette, Boston, MA 02111, Attention: Corporate Trust Department (Alkermes,
Inc. 3-3/4% Convertible Subordinated Notes due 2007).
Custodian: The term "Custodian" means State Street Bank and Trust
Company with respect to the Notes in global form, or any successor entity
thereto.
default: The term "default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.
Defaulted Interest: The term "Defaulted Interest" shall have the
meaning specified in Section 2.3.
Depositary: The term "Depositary" means, with respect to the Notes
issuable or issued in whole or in part in global form, the person specified in
Section 2.5(d) as the Depositary with respect to such Notes, until a successor
shall have been appointed and become such pursuant to the applicable provisions
of this Indenture, and thereafter, "Depositary" shall mean or include such
successor.
Designated Senior Indebtedness: The term "Designated Senior
Indebtedness" means (i) the Company's obligations in respect of money now or
hereafter borrowed from Fleet National
3
<PAGE> 9
Bank or any commercial bank and (ii) the Company's obligations under any
particular Senior Indebtedness in which the instrument creating or evidencing
the same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such Senior
Indebtedness shall be "Designated Senior Indebtedness" for purposes of this
Indenture (provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness).
Event of Default: The term "Event of Default" shall mean any event
specified in Section 7.1, continued for the period of time, if any, and after
the giving of notice, if any, therein designated.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
Expiration Time: The term "Expiration Time" shall have the meaning
specified in Section 15.5(f) or 15.5(g).
Global Note: The term "Global Note" shall have the meaning specified in
Section 2.5(b).
Indebtedness: The term "Indebtedness" shall mean any obligations of, or
guaranteed or assumed by, the Company or any Significant Subsidiary for borrowed
money.
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Initial Purchasers: The term "Initial Purchasers" means FleetBoston
Robertson Stephens, Inc., Adams, Harkness & Hill, Inc., ING Barings LLC, J.P.
Morgan Securities Inc., PaineWebber Incorporated, SG Cowen Securities
Corporation and U.S. Bancorp Piper Jaffray Inc.
Liquidated Damages: The term "Liquidated Damages" means all liquidated
damages then owing pursuant to Section 3 of the Registration Rights Agreement.
Make-Whole Payment: The term "Make-Whole Payment" shall have the
meaning specified in Section 3.1.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or
Notes, as the case may be, authenticated and delivered under this Indenture.
Noteholder or holder: The terms "Noteholder" or "holder" as applied to
any Note, or other similar terms (but excluding the term "beneficial holder"),
shall mean any person in whose name at the time a particular Note is registered
on the Note register.
Note registrar: The term "Note registrar" shall have the meaning
specified in Section 2.5(a).
4
<PAGE> 10
Note register: The term "Note register" shall have the meaning
specified in Section 2.5.
Officers' Certificate: The term "Officers' Certificate", when used with
respect to the Company, shall mean a certificate signed by (a) one of the
President, the Chief Executive Officer, any Executive or Senior Vice President
or any Vice President (whether or not designated by a number or numbers or word
added before or after the title "Vice President") and (b) by one of the
Treasurer or any Assistant Treasurer, Secretary or any Assistant Secretary or
Controller of the Company, which is delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 17.5 if and to
the extent required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except:
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment, or redemption
of which monies in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the
Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); provided
that if such Notes are to be redeemed, as the case may be, prior to the
maturity thereof, notice of such redemption shall have been given as
provided in Section 3.2, or provision satisfactory to the Trustee shall
have been made for giving such notice;
(c) Notes in lieu of which, or in substitution for which,
other Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof satisfactory to the Trustee is
presented that any such Notes are held by bona fide holders in due
course; and
(d) Notes converted into Common Stock pursuant to Article XV
and Notes deemed not outstanding pursuant to Section 3.2.
Payment Blockage Notice: The term "Payment Blockage Notice" shall have
the meaning specified in Section 4.2(b).
person: The term "person" shall mean an individual, a corporation, a
limited liability company, an association, a partnership, an individual, a joint
venture, a joint stock company, a
5
<PAGE> 11
trust, an unincorporated organization or a government or an agency or a
political subdivision thereof.
Portal Market: The term "Portal Market" shall mean The Portal Market
operated by the National Association of Securities Dealers, Inc. or any
successor thereto.
Predecessor Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.
Purchase Agreement: The term "Purchase Agreement" means that certain
Purchase Agreement, dated as of February 15, 2000, by and among the Company and
the Initial Purchasers (as amended from time to time by the parties thereto).
Purchased Shares: The term "Purchased Shares" shall have the meaning
specified in Sections 15.5(f) and 15.5(g).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as
defined in Rule 144A.
record date: The term "record date" shall have the meaning specified in
Section 2.3.
Registration Rights Agreement: The term "Registration Rights Agreement"
means that certain Registration Rights Agreement, dated as of February 18, 2000,
between the Company and the Initial Purchasers.
Repurchase Event: The term "Repurchase Event" shall have the meaning
specified in Section 16.4.
Repurchase Price: The term "Repurchase Price" has the meaning specified
in Section 16.1.
Responsible Officer: The term "Responsible Officer", when used with
respect to the Trustee, shall mean an officer of the Trustee in the Corporate
Trust Office assigned and duly authorized by the Trustee to administer its
obligations under this Indenture.
Restricted Securities: The term "Restricted Securities" has the meaning
specified in Section 2.5(d).
Rule 144A: The term "Rule 144A" shall mean Rule 144A as promulgated
under the Securities Act.
Securities Act: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
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Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on (including any interest accruing after the
filing of a petition by or against the Company under any bankruptcy law, whether
or not allowed as a claim after such filing in any proceeding under such
bankruptcy law) and any other payment due pursuant to, any of the following,
whether outstanding on the date of this Indenture or thereafter incurred or
created:
(a) all indebtedness of the Company for money borrowed that is
evidenced by notes, debentures, bonds or other securities (including,
but not limited to, those which are convertible or exchangeable for
securities of the Company);
(b) all indebtedness of the Company due and owing with respect
to letters of credit, bank guarantees or bankers' acceptances
(including, but not limited to, reimbursement obligations with respect
thereto);
(c) all indebtedness or other obligations of the Company due
and owing with respect to interest rate and currency swap agreements,
cap, floor and collar agreements, currency spot and forward contracts
and other similar agreements and arrangements;
(d) all indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit
facilities or letters of credit available to the Company;
(e) all obligations of the Company under leases required or
permitted to be capitalized under generally accepted accounting
principles;
(f) all indebtedness or obligations of others of the kinds
described in any of the preceding clauses (a), (b), (c), (d) or (e)
assumed by or guaranteed in any manner by the Company or in effect
guaranteed (directly or indirectly) by the Company through an agreement
to purchase, contingent or otherwise, and all obligations of the
Company under any such guarantee or other arrangements; and
(g) all renewals, extensions, refundings, deferrals,
amendments or modifications of indebtedness or obligations of the kinds
described in any of the preceding clauses (a), (b), (c), (d), (e) or
(f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement is subordinate to,
or is not superior to, or is pari passu with, the Notes; provided that Senior
Indebtedness shall not include (i) any indebtedness of any kind of the Company
to any Subsidiary of the Company, a majority of the voting stock of which is
owned, directly or indirectly, by the Company, (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets or services
incurred in the ordinary course of business, or (iii) the Notes.
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Significant Subsidiary: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1-02 of Regulation
S-X of the Securities and Exchange Commission.
Subsidiary: The term "Subsidiary" means a corporation more than 50% of
the outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
Trading Day: The term "Trading Day" has the meaning specified in
Section 15.5(h)(5).
transfer: The term "transfer" shall have the meaning specified in
Section 2.5(d).
Trigger Event: The term "Trigger Event" shall have the meaning
specified in Section 15.5(d).
Trust Indenture Act: The term "Trust Indenture Act" shall mean the
Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Sections 11.3 and 15.6;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
after the date hereof, the term "Trust Indenture Act" shall mean, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean State Street Bank and Trust
Company, and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in Article XV
and Article XVI.
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1. Designation, Amount and Issue of Notes. The Notes shall be
designated as "3-3/4% Convertible Subordinated Notes due 2007." Notes not to
exceed the aggregate principal amount of $200,000,000 (or $250,000,000 if the
option set forth in Section 2(b) of the Purchase Agreement is exercised in full)
upon the execution of this Indenture, or (except pursuant to Sections 2.5, 2.6,
3.3, 15.2 and 16.2) from time to time thereafter, may be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes upon the written order of the Company,
signed by the Company's (a) President, Executive or Senior Vice President or any
Vice President (whether or not designated by a number or numbers or word or
words added before or after the title "Vice President") and (b) Treasurer or
Assistant Treasurer or its Secretary or any Assistant Secretary, without any
further action by the Company hereunder, provided, however, that said Notes may
not be executed, delivered or authenticated unless and until the Trustee shall
have received an Officers' Certificate and opinion of counsel.
Section 2.2. Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be substantially in the form set
forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage.
The Global Note shall represent such of the outstanding Notes as shall
be specified therein and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges permitted hereby. Any
endorsement of the Global Note to reflect the amount of any increase or decrease
in the amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in such manner and
upon instructions given by the holder of such Notes in accordance with this
Indenture. Payment of principal of and interest and premium, if any (including
any redemption price), on the Global Note shall be made to the holder of such
Note.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and is hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
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Section 2.3. Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, and shall bear interest from the
applicable date and accrued interest shall be payable semiannually on February
15 and August 15, of each year, commencing August 15, 2000 as specified on the
face of the form of Note, attached as Exhibit A hereto.
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted after the record
date and on or before the interest payment date) shall be entitled to receive
the interest payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and on or prior to such interest payment date; provided that,
in the case of any Note, or portion thereof, called for redemption pursuant to
Article III on a redemption date, or repurchased by the Company pursuant to
Article XVI on a repurchase date, during the period from the close of business
on the record date to the close of business on the Business Day next preceding
the following interest payment date, interest shall not be paid to the person in
whose name the Note, or portion thereof, is registered on the close of business
on such record date, and the Company shall have no obligation to pay interest on
such Note or portion thereof except to the extent required to be paid upon such
redemption or repurchase in accordance with Article III or Article XVI. Interest
may, at the option of the Company, be paid by check mailed to the address of
such person on the Note registry; provided that, with respect to any holder of
Notes with an aggregate principal amount equal to or in excess of $2,000,000, at
the request of such holder in writing to the Company, interest on such holder's
Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instruction supplied by such holder from time
to time to the Trustee and paying agent (if different from Trustee) at least two
days prior to the applicable record date. The term "record date" with respect to
any interest payment date shall mean the February 1 or August 1 preceding said
February 15 or August 15, respectively.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months compounded semi-annually.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said February 15 or August 15 (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder; and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than twenty-five (25)
days after the receipt
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by the Trustee of such notice, unless the Trustee shall consent to an
earlier date), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than
fifteen (15) days and not less than ten (10) days prior to the date of
the proposed payment and not less than ten (10) days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such special record date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the special record date
therefor to be mailed, first-class postage prepaid, to each Noteholder
as of such special record date at his address as it appears in the Note
register, not less than ten (10) days prior to such special record
date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the persons in whose names the Notes (or
their respective Predecessor Notes) were registered at the close of
business on such special record date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes
may be listed or designated for issuance, and upon such notice as may
be required by such exchange or automated quotation system, if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.4. Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the facsimile signature of its President, its
Chief Executive Officer, any of its Executive or Senior Vice Presidents, or any
of its Vice Presidents (whether or not designated by a number or numbers or word
or words added before or after the title "Vice President") and attested by the
facsimile signature of its Secretary or any of its Assistant Secretaries (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such
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officer of the Company; and any Note may be signed on behalf of the Company by
such persons as, at the actual date of the execution of such Note, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions on
Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any
other office or agency of the Company designated pursuant to Section
5.2 being herein sometimes collectively referred to as the "Note
register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and
of transfers of Notes. Such register shall be in written form or in any
form capable of being converted into written form within a reasonable
period of time. The Trustee is hereby appointed "Note registrar" for
the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in
accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the
Note registrar or any co-registrar, and satisfaction of the
requirements for such transfer set forth in this Section 2.5, the
Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more
new Notes of any authorized denominations and of a like aggregate
principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender
of the Notes to be exchanged at any such office or agency. Whenever any
Notes are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Notes which the
Noteholder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the
Trustee, the Note registrar or any co-registrar) be duly endorsed, or
be accompanied by a written instrument or instruments of transfer in
form satisfactory to the Company and duly executed, by the Noteholder
thereof or his attorney-in-fact duly authorized in writing.
No service charge shall be charged to the Noteholder for any
exchange or registration of transfer of Notes, but the Company may
require payment of a sum sufficient to cover any tax, assessments or
other governmental charges that may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of
(a) any Notes for a period of fifteen (15) days next preceding any
selection of Notes to be redeemed or (b) any Notes called for
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<PAGE> 18
redemption or, if a portion of any Note is selected or called for
redemption, such portion thereof selected or called for redemption or
(c) any Notes surrendered for conversion or, if a portion of any Note
is surrendered for conversion, such portion thereof surrendered for
conversion or (d) any Notes, or a portion of any Note, surrendered for
repurchase (and not withdrawn) in connection with a Repurchase Event.
All Notes issued upon any transfer or exchange of Notes in
accordance with this Indenture shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits
under this Indenture as the Notes surrendered upon such registration of
transfer or exchange.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, unless otherwise required by law, all
Notes issued to QIBs pursuant to Rule 144A of the Securities Act to be
traded on The Portal Market shall be represented by a Note in global
form (the "Global Note") registered in the name of the Depositary or
the nominee of the Depositary. The transfer and exchange of beneficial
interests in the Global Note, which does not involve the issuance of a
definitive Note, shall be effected through the Depositary (but not the
Trustee or the Custodian) in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of
the Depositary therefor.
Notes resold to persons who are not QIBs will be issued in
definitive registered form and may not be represented by the Global
Note. In addition, at any time at the request of a QIB that is a
beneficial holder of an interest in the Global Note, such beneficial
holder shall be entitled to obtain a definitive Note upon written
request to the Trustee and the Custodian in accordance with the
standing instructions and procedures existing between the Depositary
and the Custodian for the issuance thereof. Upon receipt of any such
request, the Trustee or the Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Custodian, the aggregate
principal amount of the Global Note to be reduced by the principal
amount of the definitive Note issued upon such request to such
beneficial holder and, following such reduction, the Company will
execute and the Trustee will authenticate and deliver to such
beneficial holder (or its nominee) a definitive Note or Notes in the
appropriate aggregate principal amount in the name of such beneficial
holder (or its nominee) and bearing such restrictive legends as may be
required by this Indenture.
Any transfer of a beneficial interest in the Global Note which
cannot be effected through book-entry settlement must be effected by
the delivery to the transferee (or its nominee) of a definitive Note or
Notes registered in the name of the transferee (or its nominee) on the
books maintained by the Trustee in accordance with the transfer
restrictions set forth herein. With respect to any such transfer, the
Trustee or the Custodian, at the direction of the Trustee, will cause,
in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal
amount of the Global Note to be reduced by the principal amount of the
beneficial interest in the Global Note being transferred and, following
such reduction,
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the Company will execute and the Trustee will authenticate and deliver
to the transferee (or such transferee's nominee, as the case may be), a
Note or Notes in the appropriate aggregate principal amount in the name
of such transferee (or its nominee) and bearing such restrictive
legends as may be required by this Indenture.
(c) So long as the Notes are eligible for book-entry
settlement, unless otherwise required by law, upon any transfer of a
definitive Note to a QIB in accordance with Rule 144A, unless otherwise
requested by the transferor, and upon receipt of the definitive Note or
Notes being so transferred, together with a certification from the
transferor that the transferee is a QIB (or other evidence satisfactory
to the Trustee), the Trustee shall make or direct the Custodian to
make, an endorsement on the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global Note
by the principal amount of the Note being transferred to the QIB, the
Trustee shall cancel such definitive Note or Notes and cause, or direct
the Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Custodian, the
aggregate principal amount of Notes represented by the Global Note to
be increased accordingly; provided that no definitive Note, or portion
thereof, in respect of which the Company or an Affiliate of the Company
held any beneficial interest shall be included in the Global Note until
such definitive Note is freely tradable in accordance with Rule 144(k);
provided further that the Trustee shall authenticate and deliver Notes
in definitive form upon any transfer of a beneficial interest in the
Global Note to the Company or any Affiliate of the Company.
Any Global Note may be endorsed with or have incorporated in
the text thereof such legends or recitals or changes not inconsistent
with the provisions of this Indenture as may be required by the
Custodian, the Depositary or by the National Association of Securities
Dealers, Inc. in order for the Notes to be tradeable on The Portal
Market or as may be required for the Notes to be tradeable on any other
market developed for trading of securities pursuant to Rule 144A or
required to comply with any applicable law or any regulation thereunder
or with the rules and regulations of any securities exchange or
automated quotation system upon which the Notes may be listed or traded
or designated for issuance or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to
which any particular Notes are subject.
(d) Every Note that bears or is required under this Section
2.5(d) to bear either of the legends set forth in this Section 2.5(d)
(together with any Common Stock issued upon conversion of the Notes and
required to bear either of the legends set forth in Section 2.5(e),
collectively, the "Restricted Securities") shall be subject to the
restrictions on transfer set forth in this Section 2.5(d) (including
one of the legends set forth below), unless such restrictions on
transfer shall be waived by written consent of the Company, and the
holder of each such Restricted Security, by such holder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As
used in Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any
sale, pledge, transfer or other disposition whatsoever of any
Restricted Security.
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Until two (2) years after the original issuance date of any
Note, any certificate evidencing such Note (and all securities issued
in exchange therefor or substitution thereof, other than Common Stock,
if any, issued upon conversion thereof which shall bear the legend set
forth in Section 2.5(e), if applicable) shall bear a legend in
substantially the following form (unless such Notes have been
transferred pursuant to a registration statement that has been declared
effective under the Securities Acts and which continues to be effective
at the time of such transfer, pursuant to the exemption from
registration provided by Rule 144 under the Securities Act, or unless
otherwise agreed by the Company in writing, with notice thereof to the
Trustee):
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT); (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED HEREBY
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (D) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND
WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER);
AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
NOTE EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE
NOTE EVIDENCED HEREBY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(D) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND
TRUST COMPANY, AS TRUSTEE. IF THE PROPOSED TRANSFER IS
PURSUANT TO CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO STATE STREET BANK AND TRUST COMPANY, AS
TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
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INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE
REMOVED UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED
HEREBY PURSUANT TO CLAUSE 2(C) OR 2(D) ABOVE OR THE EXPIRATION
OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired
in accordance with their terms may, upon surrender of such Note for
exchange to the Note registrar in accordance with the provisions of
this Section 2.5, be exchanged for a new Note or Notes, of like tenor
and aggregate principal amount, which shall not bear the restrictive
legend required by this Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in this Section 2.5(d)), the Global Note
may not be transferred as a whole or in part except by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such
successor Depositary.
The Depositary shall be a clearing agency registered under the
Exchange Act. The Company initially appoints The Depository Trust
Company to act as Depositary with respect to the Global Note.
Initially, the Global Note shall be issued to the Depositary,
registered in the name of Cede & Co., as the nominee of the Depositary,
and deposited with the Trustee as custodian for Cede & Co.
If at any time the Depositary for the Global Note notifies the
Company that it is unwilling or unable to continue as Depositary for
such Note, the Company may appoint a successor Depositary with respect
to such Note. If a successor Depositary for the Global Note is not
appointed by the Company within ninety (90) days after the Company
receives such notice, the Company will execute, and the Trustee, upon
receipt of an Officers' Certificate for the authentication and delivery
of Notes, will authenticate and deliver, Notes in definitive form, in
an aggregate principal amount equal to the principal amount of the
Global Note, in exchange for the Global Note, and upon delivery of the
Global Note to the Trustee the Global Note shall be canceled.
If a Note in certificated form is issued in exchange for any
portion of a Global Note after the close of business on any record date
at the office or agency where such exchange occurs and before the
opening of business at such office or agency on the next succeeding
interest payment date, interest will not be payable on such interest
payment date in respect of such certificated Note, but will be payable
on such interest payment
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date only with respect to the exchanged portion of the Global Note in
accordance with the provisions of this Indenture.
Definitive Notes issued in exchange for all or a part of the
Global Note pursuant to this Section 2.5(d) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. Upon execution and authentication, the
Trustee shall deliver such definitive Notes to the persons in whose
names such definitive Notes are so registered.
At such time as all interests in the Global Note have been
redeemed, converted, canceled, repurchased or transferred, the Global
Note shall be, upon receipt thereof, canceled by the Trustee in
accordance with standing procedures and instructions existing between
the Depositary and the Custodian. At any time prior to such
cancellation, if any interest in the Global Note is exchanged for
definitive Notes, redeemed, converted, canceled, repurchased or
transferred to a transferee who receives definitive Notes therefor or
any definitive Note is exchanged or transferred for part of the Global
Note, the principal amount of the Global Note shall, in accordance with
the standing procedures and instructions existing between the
Depositary and the Custodian, be appropriately reduced or increased, as
the case may be, and an endorsement shall be made on the Global Note,
by the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase.
(e) Until two (2) years after the original issuance date of
any Note, any stock certificate representing Common Stock issued upon
conversion of such Note shall bear a legend in substantially the
following form (unless the Note or such Common Stock has been sold
pursuant to the exemption from registration provided by Rule 144 under
the Securities Act or pursuant to a registration statement that has
been declared effective under the Securities Act, and which continues
to be effective at the time of such transfer, or such Common Stock has
been issued upon conversion of Notes that have been transferred
pursuant to a registration statement that has been declared effective
under the Securities Act or pursuant to the exemption from registration
provided by Rule 144 under the Securities Act, or unless otherwise
agreed by the Company with written notice thereof to the Trustee and
any transfer agent for the Common Stock):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE UPON THE
CONVERSION OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS
ISSUED, (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE
COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY
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THEREOF, (B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN COMPLIANCE WITH RULE
144A, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (D)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE
EFFECTIVE AT THE TIME OF SUCH TRANSFER); (2) PRIOR TO ANY SUCH
TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(D)
ABOVE), IT WILL FURNISH TO EQUISERVE, AS TRANSFER AGENT, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE
COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT; AND (3) IT WILL DELIVER TO EACH PERSON TO
WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER
THAN A TRANSFER PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND WILL
BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON
STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(C) OR 1(D) ABOVE
OR THE EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF
THE NOTE UPON THE CONVERSION OF WHICH THE COMMON STOCK
EVIDENCED HEREBY WAS ISSUED.
Any such Common Stock as to which such restrictions on
transfer shall have expired in accordance with their terms may, upon
surrender of the certificates representing such shares of Common Stock
for exchange in accordance with the procedures of the transfer agent
for the Common Stock, be exchanged for a new certificate or
certificates for a like aggregate number of shares of Common Stock,
which shall not bear the restrictive legend required by this Section
2.5(e).
(f) Any Note or Common Stock issued upon the conversion or
exchange of a Note that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act
(or any successor provision), is purchased or owned by the Company or
any Affiliate thereof may not be resold by the Company or such
Affiliate unless registered under the Securities Act or resold pursuant
to an exemption from the registration requirements of the Securities
Act in a transaction that results in such Notes or Common Stock, as the
case may be, no longer being "restricted securities" (as defined under
Rule 144).
(g) Notwithstanding any provision of Section 2.5 to the
contrary, in the event Rule 144(k) as promulgated under the Securities
Act (or any successor rule) is amended
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to change the two-year period under Rule 144(k) (or the corresponding
period under any successor rule), from and after receipt by the Trustee
of the Officers' Certificate and Opinion of Counsel provided for in
this Section 2.5(g), (i) each reference in Section 2.5(d) to "two (2)
years" and in the restrictive legend set forth in such paragraph to
"TWO YEARS" shall be deemed for all purposes hereof to be references to
such changed period, (ii) each reference in Section 2.5(e) to "two (2)
years" and in the restrictive legend set forth in such paragraph to
"TWO YEARS" shall be deemed for all purposes hereof to be references to
such changed period and (iii) all corresponding references in the Notes
and the restrictive legends thereon shall be deemed for all purposes
hereof to be references to such changed period, provided that such
changes shall not become effective if they are otherwise prohibited by,
or would otherwise cause a violation of, the then-applicable federal
securities laws. As soon as practicable after the Company has knowledge
of the effectiveness of any such amendment to change the two-year
period under Rule 144(k) (or the corresponding period under any
successor rule), unless such changes would otherwise be prohibited by,
or would otherwise cause a violation of, the then-applicable securities
law, the Company shall provide to the Trustee an Officers' Certificate
and Opinion of Counsel informing the Trustee of the effectiveness of
such amendment and the effectiveness of the foregoing changes to
Sections 2.5(d) and 2.5(e) and the Notes. The provisions of this
Section 2.5(g) will not be effective until such time as the Opinion of
Counsel and Officers' Certificate have been received by the Trustee
hereunder. This Section 2.5(g) shall apply to successive amendments to
Rule 144(k) (or any successor rule) changing the holding period
thereunder.
Section 2.6. Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless from any loss, liability, cost or expense caused by
or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or is about to be converted into Common Stock shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Note, pay or authorize the payment of or convert or authorize the
conversion of the same (without surrender thereof except in the case of a
mutilated Note), as the case may be, if the applicant for such payment or
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conversion shall furnish to the Company, to the Trustee and, if applicable, to
such authenticating agent such security or indemnity as may be required by them
to save each of them harmless for any loss, liability, cost or expense caused by
or connected with such substitution, and, in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Note and of
the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes and shall preclude any and all other rights or
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the definitive Notes but with such omissions, insertions and variations
as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive Notes (other than
in the case of Notes in global form) and thereupon any or all temporary Notes
(other than any the Global Note) may be surrendered in exchange therefor, at
each office or agency maintained by the Company pursuant to Section 5.2 and the
Trustee or such authenticating agent shall authenticate and deliver in exchange
for such temporary Notes an equal aggregate principal amount of definitive
Notes. Such exchange shall be made by the Company at its own expense and without
any charge therefor. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as definitive Notes authenticated and delivered hereunder.
Section 2.8. Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. Upon written
instructions of the Company, the Trustee shall destroy canceled Notes and, after
such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such
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acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
Section 2.9. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" numbers (if then generally in use), and, if so, the trustee shall use
"CUSIP" numbers in notices of redemption and Company Notices as a convenience to
holders of the Notes; provided, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of a redemption or Company Notice and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any redemption or offer to purchase pursuant to Article XVI shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE III.
REDEMPTION OF NOTES
Section 3.1. Redemption Prices. The Company may, at its option, redeem
all or from time to time any part of the Notes on any date prior to maturity,
upon notice as set forth in Section 3.2, and at the optional redemption prices
set forth in the form of Note attached as Exhibit A hereto, together with
accrued interest, if any, to, but excluding, the date fixed for redemption,
provided, however, that no such redemption shall be effected before February 19,
2003.
The Company may, at its option, redeem all or from time to time any
part of the Notes at any time prior to February 19, 2003, upon notice as set
forth in Section 3.2, and at the provisional redemption price equal to $1,000
per $1,000 principal amount of the Notes redeemed, together with accrued
interest, if any, to, but excluding, the date fixed for provisional redemption
if (i) the Closing Price has exceeded 200% of the Conversion Price (as such may
be adjusted from time to time) then in effect for at least 20 Trading Days in
any consecutive 30-Trading Day period ending on the Trading Day immediately
prior to the date of mailing of the provisional notice of redemption pursuant to
Section 3.2 and (ii) a shelf registration statement covering resales of the
Notes and the Common Stock issuable upon conversion thereof is effective and
available for use and is expected to remain effective for the 30 days following
the provisional redemption date.
Upon any such provisional redemption which occurs prior to February 15,
2001, the Company shall also make an additional payment in cash (the "Make-Whole
Payment") with respect to the Notes called for redemption to Holders on the date
the provisional redemption notice is sent pursuant to Section 3.2 in an amount
equal to $37.50 per $1,000 principal amount of the Notes, less the amount of any
interest actually paid on such Notes prior to the provisional redemption notice
date. The Company shall make the Make-Whole Payment on all Notes called for
provisional redemption, including those Notes converted into Common Stock
between the provisional notice date and the provisional redemption date.
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Section 3.2. Notice of Redemption; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption, and it, or at its request (which must be received by the Trustee at
least ten (10) Business Days prior to the date the Trustee is requested to give
notice as described below unless a shorter period is agreed to by the Trustee),
the Trustee in the name of and at the expense of the Company, shall mail or
cause to be mailed a notice of such redemption (a) at least ten (10) Trading
Days and not more than twenty (20) Trading Days prior to the date fixed for
provisional redemption and (b) at least thirty (30) and not more than sixty (60)
days prior to the date fixed for optional redemption, to the holders of Notes so
to be redeemed as a whole or in part at their last addresses as the same appear
on the Note register (provided that if the Company shall give such notice, it
shall also give such notice, and notice of the Notes to be redeemed, to the
Trustee). Such mailing shall be by first class mail. The notice if mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the holder receives such notice. In any case, failure to give
such notice by mail or any defect in the notice to the holder of any Note
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the place or places of payment, that
payment will be made upon presentation and surrender of such Notes, that
interest accrued to, but excluding, the date fixed for redemption will be paid
as specified in said notice, and that on and after said date interest thereon or
on the portion thereof to be redeemed will cease to accrue. Such notice shall
also state the Make-Whole Payment, if any, and the current Conversion Price and
the date on which the right to convert such Notes or portions thereof into
Common Stock will expire. If fewer than all the Notes are to be redeemed, the
notice of redemption shall identify the Notes to be redeemed. In case any Note
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
in principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section, the Company will deposit with the
Trustee or with one or more paying agents (or, if the Company is acting as its
own paying agent, set aside, segregate and hold in trust as provided in Section
5.4) an amount of money sufficient to redeem on the redemption date all the
Notes (or portions thereof) so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued interest to, but excluding, the date
fixed for redemption; provided that if such payment is made on the redemption
date it must be received by the Trustee or paying agent, as the case may be, by
10:00 a.m. New York City time, on such date. If any Note called for redemption
is converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
be paid to the Company upon its request, or, if then held by the Company shall
be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Company will give
the Trustee written notice in the form of an Officers' Certificate not fewer
than thirty-five (35) days (or such shorter
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period of time as may be acceptable to the Trustee) prior to the redemption date
as to the aggregate principal amount of Notes to be redeemed. If fewer than all
the Notes are to be redeemed, the Trustee shall select the Notes or portions
thereof to be redeemed (in principal amounts of $1,000 or integral multiples
thereof), by lot, or by a method the Trustee considers fair and appropriate (as
long as such method is not prohibited by the rules of any United States national
securities exchange or of an established automated over-the-counter trading
market in the United States on which the Notes are then listed). If any Note
selected for partial redemption is converted in part after such selection, the
converted portion of such Note shall be deemed (so far as is possible) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is converted as a whole or in part before the
mailing of the notice of redemption.
Upon any redemption of less than all Notes, the Company and the Trustee
may (but need not) treat as outstanding any Notes surrendered for conversion
during the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as not outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3. Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to, but excluding, the date fixed for redemption,
and on and after said date (unless the Company shall default in the payment of
such Notes at the redemption price, together with interest accrued to, but
excluding, said date) interest on the Notes or portion of Notes so called for
redemption shall cease to accrue and such Notes shall cease after the close of
business on the Business Day next preceding the date fixed for redemption to be
convertible into Common Stock and, except as provided in Sections 8.5 and 13.4,
to be entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Notes except the right to receive
the redemption price thereof and unpaid interest to, but excluding, the date
fixed for redemption. On presentation and surrender of such Notes at a place of
payment in said notice specified, the said Notes or the specified portions
thereof to be redeemed shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to, but
excluding, the date fixed for redemption; provided that, if the applicable
redemption date is an interest payment date, the semi-annual payment of interest
becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof, and with respect to a provisional redemption,
the holder of any Notes converted into Common Stock pursuant to the terms hereof
after the provisional redemption notice date and prior to the provisional
redemption date shall have the right to the Make-Whole Payment regardless of the
conversion.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a
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new Note or Notes, of authorized denominations, in principal amount equal to the
unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any Event of Default other than under Section 7.1(a), (b) or (d),
a Responsible Officer of the Trustee has knowledge. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Note and
such Note shall remain convertible into Common Stock until the principal and
premium, if any, shall have been paid or duly provided for.
Section 3.4. Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes not converted prior to the expiration of
such conversion right by an agreement with one or more investment bankers or
other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with interest accrued to the date
fixed for redemption, of such Notes. Notwithstanding anything to the contrary
contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to, but
excluding, the date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, a copy of which, certified as true and correct by the
Secretary or Assistant Secretary of the Company will be filed with the Trustee
prior to the date fixed for redemption, any Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article XV)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to convert
any such Notes shall be deemed to have been extended through such time), subject
to payment of the above amount as aforesaid. At the direction of the Company,
the Trustee shall hold and dispose of any such amount paid to it in the same
manner as it would monies deposited with it by the Company for the redemption of
Notes. Without the Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Notes shall
increase or otherwise affect any of the powers, duties, responsibilities or
obligations of the Trustee as set forth in this Indenture, and the Company
agrees to indemnify the Trustee from, and hold it harmless against, any loss,
liability or expense arising out of or in connection with any such arrangement
for the purchase and conversion of any Notes between the Company and such
purchasers, including the costs and expenses incurred by the Trustee in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
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ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1. Agreement of Subordination. The Company covenants and
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Notes (including, but not limited to, the redemption price or repurchase price
with respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated to the prior payment in full, in cash or in such
other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, whether outstanding at the date of
this Indenture or thereafter incurred or created.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2. Payments to Noteholders. No payment (including pursuant to
any redemption or repurchase of Notes) shall be made with respect to the
principal of, or premium, if any, or interest (including Liquidated Damages, if
any) on the Notes, except payments and distributions made by the Trustee as
permitted by Section 4.6, if:
(a) a default in the payment of principal, premium, if any, or
interest or other payment due on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace; or
(b) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that then permits holders of the
Designated Senior Indebtedness as to which such default related to
accelerate its maturity and the Trustee and the Company receive a
notice of such default (a "Payment Blockage Notice") from a
representative of Designated Senior Indebtedness or a holder of
Designated Senior Indebtedness or the Company.
The Company may and shall resume payments on the Notes (1) in the case
of a payment default, on the date upon which such default is cured or waived or
ceases to exist, and (2) in the case of a nonpayment default with respect to
Designated Senior Indebtedness, on the earlier of the date on which the
nonpayment default is cured or waived or ceases to exist or 179 days pass after
the date on which the applicable Payment Blockage Notice is received.
No new period of payment blockage may be commenced pursuant to a
Payment Blockage Notice unless (A) at least 365 days shall have elapsed since
the first day of effectiveness of the immediately prior Payment Blockage Notice
and (B) all scheduled payments
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of principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash, or in such other form of payment as may be acceptable
to the holders of the Notes or the Trustee or the Noteholders shall not have
begun proceedings to enforce the right of the Noteholders to receive payment. No
default (whether or not such event of default is on the same issue of Designated
Senior Indebtedness) that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
In addition, in the event of any acceleration of the Notes because of
an Event of Default, no payment or distribution (including with respect to any
redemption or repurchase of the Notes) shall be made to the Trustee or any
holder of Notes with respect to the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, except payments and
distributions made by the Trustee as permitted by Section 4.6, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness or such acceleration is rescinded in accordance
with the terms of this Indenture. If payment of the Notes is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.
Notwithstanding the foregoing, in the event that the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately be paid over or delivered to,
the holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.
Nothing in this Section 4.2 shall apply to claims of, or payments to,
the Trustee pursuant to Section 8.6. This Section 4.2 shall be subject to the
further provisions of Section 4.6.
Section 4.3. Bankruptcy and Dissolution, Etc. Upon any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
amounts due or to become due upon all Senior Indebtedness shall first be paid in
full, in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness, before any payment is made on account of the
principal or premium, if any, and interest on the Notes (except payments made
pursuant to Article XIII from monies deposited with the Trustee pursuant thereto
prior to the happening of such dissolution, winding-up, liquidation or
reorganization or bankruptcy, insolvency, receivership or other such
proceedings);
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and upon any such dissolution, winding-up, liquidation or reorganization or
bankruptcy, insolvency, receivership or other such proceedings, any payment by
the Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Notes or
the Trustee under this Indenture would be entitled, except for the provisions of
this Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness, before any payment or
distribution is made to the holders of the Notes or to the Trustee under this
Indenture.
Notwithstanding the foregoing, in the event that the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind in contravention of any term of this Indenture, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness, then
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall immediately be paid over or delivered to,
the holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full, in cash or such other form of payment
as may be acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to or for the holders of such Senior
Indebtedness.
For purposes of Section 4.2 hereof and this Section 4.3, the words
"cash, property or securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Article IV with respect to the Notes) to the payment of all Senior Indebtedness
which may at the time be outstanding; provided that (i) the Senior Indebtedness
is assumed by the new corporation, if any, resulting from such reorganization or
adjustment, and (ii) the rights of the holders of Senior Indebtedness (other
than leases which are not assumed by the Company or by the new corporation, as
the case may be) are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
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Section 4.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII.
Nothing in this Section 4.3 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.6. This Section 4.3 shall be subject
to the further provisions of Section 4.6.
Section 4.4. Subrogation of Notes. Subject to the payment in full in
cash or in such other form of payment as may be acceptable to the holders of
Senior Indebtedness of all Senior Indebtedness, the rights of the holders of the
Notes shall be subrogated to the extent of the payments or distributions made to
the holders of such Senior Indebtedness pursuant to the provisions of this
Article IV (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to other indebtedness of the
Company to substantially the same extent as the Notes are subordinated and is
entitled to like rights of subrogation) to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, and premium, if any, and interest on the Notes shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or securities to
which the holders of the Notes or the Trustee would be entitled except for the
provisions of this Article IV, and no payment over pursuant to the provisions of
this Article IV, to or for the benefit of the holders of Senior Indebtedness by
holders of the Notes or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness; and no payments or distributions of cash, property or securities
to or for the benefit of the holders of the Notes pursuant to the subrogation
provisions of this Article IV, which would otherwise have been paid to the
holders of Senior Indebtedness shall be deemed to be a payment by the Company to
or for the account of the Notes. It is understood that the provisions of this
Article IV are and are intended solely for the purposes of defining the relative
rights of the holders of the Notes, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of, and premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article IV, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
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certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.5. Authorization by Noteholders. Each holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.
Section 4.6. Notice to Trustee. The Company shall give written notice
to the Trustee of the issuance of any Designated Senior Indebtedness. In
addition, the Company shall give prompt written notice in the form of an
Officers' Certificate to a Responsible Officer of the Trustee and to any paying
agent of any fact known to the Company which would prohibit the making of any
payment of monies to or by the Trustee or any paying agent in respect of the
Notes pursuant to the provisions of this Article IV. Notwithstanding the
provisions of this Article IV or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any Senior
Indebtedness or of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Notes pursuant to the
provisions of this Article IV, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
from the Company (in the form of an Officers' Certificate) or a holder or
holders of Senior Indebtedness or from any trustee thereof who shall have been
certified by the Company or otherwise established to the reasonable satisfaction
of the Trustee to be such holder or trustee; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 8.1, shall be
entitled in all respects to assume that no such facts exist; provided that if on
a date at least two (2) Business Days prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Note), the Trustee shall not have received with respect to such monies the
notice provided for in this Section 4.6, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth,
nothing shall prevent (a) any payment by the Company or the Trustee to the
Noteholders of amounts in connection with a redemption of Notes if (i) notice of
such redemption has been given to the Noteholders pursuant to Article III prior
to the receipt by the Trustee of written notice as aforesaid, and (ii) such
notice of redemption is given not earlier than sixty (60) days before the
redemption date, (b) any payment by the Company or the Trustee to the
Noteholders of amounts in connection with a repurchase of Notes if (i) notice of
such repurchase has been given pursuant to Article XVI prior to the receipt by
the Trustee of written notice as aforesaid, and (ii) such notice of repurchase
is
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given not earlier than forty (40) days before the repurchase date, or (c) any
payment by the Trustee to the Noteholders of monies deposited with it pursuant
to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article IV, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article IV, and if such evidence is not furnished the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
Section 4.7. Trustee's Relation to Senior Indebtedness. The Trustee and
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.8. No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.9. Certain Conversions Deemed Payment. For the purposes of
this Article IV only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash,
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property or securities (other than junior securities) upon conversion of a Note
shall be deemed to constitute payment on account of the principal of such Note.
For the purposes of this Section, the term "junior securities" means (a) shares
of any stock of any class of the Company and (b) securities of the Company which
are subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Notes are so
subordinated as provided in this Article. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of the Notes, the right, which is absolute and unconditional, of the
holder of any Note to convert such Note in accordance with Article XV.
Section 4.10. Article Applicable to Paying Agents. If at any time any
paying agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term Trustee as used in this Article IV shall
(unless the context shall otherwise require) be construed as extending to and
including such paying agent within its meaning as fully for all intents and
purposes as if such paying agent were named in this Article in addition to or in
place of the Trustee; provided, however, that the first sentence of Section 4.5
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as paying agent.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1. Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual interest
payment date may be paid by mailing checks for the interest payable to or upon
the written order of the holders of Notes entitled thereto as they shall appear
on the registry books of the Company, provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of $2,000,000,
at the request of such holder in writing to the Company, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instructions supplied by such holder from time
to time to the Trustee and paying agent (if different from Trustee) at least two
days prior to the applicable record date.
Section 5.2. Maintenance of Office or Agency. The Company will maintain
in the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion, redemption or repurchase and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not designated or appointed by the Trustee. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust
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Office or the office or agency of the Trustee in the Borough of Manhattan, The
City of New York.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar, Custodian and conversion agent and the Corporate Trust Office
and the office or agency of the Trustee in the Borough of Manhattan, The City of
New York (which initially shall be State Street Bank and Trust Company, N.A., an
Affiliate of the Trustee located at 61 Broadway, 15th Floor, New York, New York
10006) as one such office or agency of the Company for each of the aforesaid
purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.
Section 5.3. Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4. Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee or if the Trustee shall appoint such a paying agent, it will
cause such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee, subject to
the provisions of this Section 5.4:
(1) that it will hold all sums held by it as such
agent for the payment of the principal of and premium, if any,
or interest on the Notes (whether such sums have been paid to
it by the Company or by any other obligor on the Notes) in
trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the Notes)
to make any payment of the principal of and premium, if any,
or interest on the Notes when the same shall be due and
payable; and
(3) that at any time during the continuance of an
Event of Default, upon request of the Trustee, it will
forthwith pay to the Trustee all sums so held in trust.
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The Company shall, on or before each due date of the principal
of, premium, if any, or interest on the Notes, deposit with the paying
agent a sum sufficient to pay such principal, premium, if any, or
interest, and (unless such paying agent is the Trustee) the Company
will promptly notify the Trustee of any failure to take such action,
provided that if such deposit is made on the due date, such deposit
must be received by the paying agent by 10:00 a.m., New York City time,
on such date.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of, premium, if any, or
interest on the Notes, set aside, segregate and hold in trust for the
benefit of the holders of the Notes a sum sufficient to pay such
principal, premium, if any, or interest so becoming due and will notify
the Trustee of any failure to take such action and of any failure by
the Company (or any other obligor under the Notes) to make any payment
of the principal of, premium, if any, or interest on the Notes when the
same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for any
other reason, pay or cause to be paid to the Trustee all sums held in
trust by the Company or any paying agent hereunder as required by this
Section 5.4, such sums to be held by the Trustee upon the trusts herein
contained and upon such payment by the Company or any paying agent to
the Trustee, the Company or such paying agent shall be released from
all further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in
this Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5. Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
Section 5.6. Rule 144A Information Requirement. Within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the Securities Act (or any successor provision), the Company
covenants and agrees that it shall, during any period in which it is not subject
to Section 13 or 15(d) under the Exchange Act, make available to any holder or
beneficial holder of Notes or any Common Stock issued upon conversion thereof,
in each case which continue to be Restricted Securities, in connection with any
sale thereof and any prospective purchaser of Notes or such Common Stock from
such holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required from time to time to enable such
holder or beneficial holder to sell its Notes or Common Stock without
registration under the Securities Act within the limitation of the exemption
provided by Rule 144A, as such rule may be amended from time to time. Upon the
request of any holder or any beneficial holder of the Notes or such Common
Stock, the Company will deliver to such holder a written statement as to whether
it has complied with such requirements.
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Section 5.7. Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law has been enacted.
Section 5.8. Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on March 31, 2000) an Officers'
Certificate stating whether or not to the best of their knowledge the signers
know of any default or Event of Default that occurred during such period. If
they do, such Officers' Certificate shall describe the default or Event of
Default and its status.
Section 5.9. Liquidated Damages. If Liquidated Damages are payable by
the Company pursuant to the Registration Rights Agreement, the Company shall
deliver to the Trustee a certificate to that effect stating (i) the amount of
such Liquidated Damages that are payable and (ii) the date on which such damages
are payable. Unless and until a Responsible Officer of the Trustee receives at
the Corporate Trust Office such a certificate, the Trustee may assume without
inquiry that no such Liquidated Damages are payable. If the Company has paid
Liquidated Damages directly to the persons entitled to them, the Company shall
deliver to the Trustee a certificate setting forth the particulars of such
payment
Section 5.10. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1. Noteholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each February 1 and August 1 in each year beginning
with August 1, 2000, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Notes as of a date not more than fifteen (15) days (or such other
date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished so long as the Trustee is acting as Note registrar.
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Section 6.2. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or under the
Notes and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Notes made
pursuant to the Trust Indenture Act.
Section 6.3. Reports by Trustee.
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to holders of Notes such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company. The Company will notify the Trustee when the Notes are listed on
any stock exchange or automated quotation system and when any such listing is
discontinued.
Section 6.4. Reports by Company.
(a) After this Indenture has been qualified under the Trust
Indenture Act, the Company shall file with the Trustee and the Commission, and
transmit to holders of Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
(b) The Company will deliver to the Trustee (a) as soon as
available and in any event within ninety (90) days after the end of each fiscal
year of the Company (i) a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the related consolidated
statements of operations, stockholders' equity and cash flows for such fiscal
year, all reported on by an independent public accountant of nationally
recognized
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standing and (ii) a report containing a management's discussion and analysis of
the financial condition and results of operations and a description of the
business and properties of the Company and (b) as soon as available and in any
event within forty-five (45) days after the end of each of the first three
quarters of each fiscal year of the Company (i) an unaudited consolidated
management's discussion and analysis of the financial condition and results of
operations of the Company for such quarter; provided that the foregoing
statements and reports shall not be required for any fiscal year or quarter, as
the case may be, with respect to which the Company files or expects to file with
the Trustee an annual report or quarterly report, as the case may be, pursuant
to the preceding paragraph of this Section 6.4. The Trustee shall have no
liability as regards the substance of the information provided by the Company or
its agents pursuant to this Section 6.4.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1. Events of Default. In case one or more of the following
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) shall have occurred and be
continuing:
(a) default in the payment of the principal of and premium, if
any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption, by
declaration or otherwise, whether or not such payment is prohibited by
the provisions of Article IV; or
(b) default for thirty (30) days in the payment of any
installment of interest or Liquidated Damages, if any, upon any of the
Notes as and when the same shall become due and payable, whether or not
such payment is prohibited by the provisions of Article IV; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants on the part of the Company in the
Notes or in this Indenture (other than a covenant default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with) and the continuance of such failure for a period of
forty-five (45) days after the date on which written notice of such
failure, requiring the Company to remedy the same, shall have been
given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes at the time
outstanding determined in accordance with Section 9.4; or
(d) a default in the payment of the Repurchase Price in
respect of any Note on the repurchase date therefor in accordance with
the provisions of Article XVI, whether or
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not such payment in cash of the Repurchase Price is prohibited by the
provisions of Article IV; or
(e) failure on the part of the Company to provide a written
notice of a Repurchase Event in accordance with Section 16.2; or
(f) failure on the part of the Company or any Significant
Subsidiary to make any payment at maturity, including any applicable
grace period, in respect of Indebtedness of, or guaranteed or assumed
by, the Company or any Significant Subsidiary, in a principal amount
then outstanding in excess of U.S. $7,500,000, and the continuance of
such failure for a period of thirty (30) days after there shall have
been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding, a
written notice specifying such default and requiring the Company to
cause such default to be cured or waived and stating that such notice
is a "Notice of Default" hereunder; or
(g) default on the part of the Company or any Significant
Subsidiary with respect to any Indebtedness of, or guaranteed or
assumed by, the Company or any Significant Subsidiary, which default
results in the acceleration of Indebtedness in a principal amount then
outstanding in excess of U.S. $7,500,000, and such Indebtedness shall
not have been discharged or such acceleration shall not have been
rescinded or annulled for a period of thirty (30) days after there
shall have been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the holders of not
less than 25% in aggregate principal amount of the Notes then
outstanding, a written notice specifying such default and requiring the
Company to cause such Indebtedness to be discharged or cause such
default to be cured or waived or such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default"
hereunder; or
(h) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(i) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of ninety (90) consecutive
days;
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then, and in each and every such case (other than an Event of Default specified
in Section 7.1(h) or 7.1(i) with respect to the Company), unless the principal
of all of the Notes shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Notes then outstanding hereunder determined in accordance with Section 9.4, by
notice in writing to the Company (and to the Trustee if given by Noteholders),
may declare the principal of and premium, if any, on all the Notes and the
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Notes contained to the contrary
notwithstanding. If an Event of Default specified in Section 7.1(h) or 7.1(i)
occurs and is continuing with respect to the Company, the principal of all the
Notes and the interest accrued thereon shall be immediately due and payable.
This provision, however, is subject to the conditions that if, at any time after
the principal of the Notes shall have been so declared due and payable, and
before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 8.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on Notes which shall have become due by acceleration,
shall have been cured or waived pursuant to Section 7.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify the Responsible Officer of
the Trustee, promptly upon becoming aware thereof, of any default or Event of
Default and shall deliver to the Trustee a statement specifying such default or
Event of Default and the action the Company has taken, is taking or proposes to
take with respect thereto.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been instituted.
Section 7.2. Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same
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shall have become due and payable, whether at maturity of the Notes or in
connection with any redemption or repurchase, by declaration under this
Indenture or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Notes, the whole amount
that then shall have become due and payable on all such Notes for principal and
premium, if any, or interest, or both, as the case may be, with interest upon
the overdue principal and premium, if any, and (to the extent that payment of
such interest is enforceable under applicable law) upon the overdue installments
of interest at the rate borne by the Notes; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any expenses or liabilities incurred by the Trustee
hereunder other than through its negligence or bad faith. Until such demand by
the Trustee, the Company may pay the principal of and premium, if any, and
interest on the Notes to the registered holders, whether or not the Notes are
overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
and to take such other actions as it may deem necessary or advisable in order to
have the claims of the Trustee and of the Noteholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Notes, its or
their creditors, or its or their property, and to collect and receive any monies
or other property payable or deliverable on any such claims, and to distribute
the same after the deduction of any amounts due the Trustee under Section 8.6;
and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of the
Noteholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including agents and counsel
fees incurred by it up to the date of such distribution. To the extent that such
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payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3. Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under
Section 8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes in default in the order
of the maturity of the installments of such interest, with interest (to
the extent that such interest has been collected by the Trustee) upon
the overdue installments of interest at the rate borne by the Notes,
such payments to be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium,
if any, and interest, with interest on the overdue principal and
premium, if any, and (to the extent that such interest has been
collected by the Trustee) upon overdue installments of interest at the
rate borne by the Notes; and in case such monies shall be insufficient
to pay in full the whole amounts so due and unpaid upon the Notes, then
to the payment of such principal and premium, if any, and interest
without preference or priority of principal and premium, if any, over
interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of
any Note over any other Note, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest; and
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Fourth: Subject to the provisions of Article IV, to the
payment of the remainder, if any, to the Company or any other person
lawfully entitled thereto.
Section 7.4. Proceedings by Noteholder. No holder of any Note shall
have any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such indemnity as may be
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 7.5. Proceedings by Trustee. In case of an Event of Default the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
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Section 7.6. Remedies Cumulative and Continuing. Except as provided in
the last paragraph of Section 2.6, all powers and remedies given by this Article
VII to the Trustee or to the Noteholders shall, to the extent permitted by law,
be deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Trustee or of any holder of any of the Notes to exercise any right or
power accruing upon any default or Event of Default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or any acquiescence therein; and, subject to the
provisions of Section 7.4, every power and remedy given by this Article VII or
by law to the Trustee or to the Noteholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7. Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may on behalf of the holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes when due, (ii) a failure by the Company to convert any Notes into Common
Stock or (iii) a default in respect of a covenant or provisions hereof which
under Article XI cannot be modified or amended without the consent of the
holders of all Notes then outstanding. Upon any such waiver the Company, the
Trustee and the holders of the Notes shall be restored to their former positions
and rights hereunder; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon. Whenever any
default or Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all purposes of the
Notes and this Indenture be deemed to have been cured and to be not continuing;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 7.8. Notice of Defaults. The Trustee shall, within ninety (90)
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, including without limiting the generality of the
foregoing any default in the payment of any Repurchase Price or in the payment
of any amount due in connection with any redemption of Notes, then in any such
event the Trustee shall be protected in withholding such notice if and so long
as a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the best
interests of the Noteholders.
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Section 7.9. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; provided that the provisions of this Section 7.9 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Noteholder, or
group of Noteholders, holding in the aggregate more than 10% in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, or interest on any Note (including, but
not limited to, the redemption price or repurchase price with respect to the
Notes being redeemed or repurchased as provided in this Indenture) on or after
the due date expressed in such Note or to any suit for the enforcement of the
right to convert any Note in accordance with the provisions of Article XV.
Section 7.10. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or any acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing or waiver of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture and, after it has been
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qualified thereunder, the Trust Indenture Act, and the Trustee
shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture and the Trust Indenture Act against
the Trustee; and
(2) in the absence of bad faith and willful
misconduct on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be established that the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee shall not be liable to any Noteholder with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of not less than a
majority in principal amount of the Notes at the time outstanding
determined as provided in Section 9.4 relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions
of this Section.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 8.2. Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note, coupon or other paper or
document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of
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Directors may be evidenced to the Trustee by a copy thereof certified
by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and any advice of
such counsel or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted
by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the provisions
of this Indenture, unless such Noteholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; provided, however, that if
the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Indenture, the Trustee may require indemnity reasonably
satisfactory to the Trustee from the Noteholders against such expenses
or liability as a condition to so proceeding; the reasonable expenses
of every such examination shall be paid by the Company or, if paid by
the Trustee or any predecessor Trustee, shall be repaid by the Company
upon demand; and
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder.
In no event shall the Trustee be liable for any consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Trustee has been advised of the likelihood of such loss or damage and regardless
of the form of action other than through the Trustee's willful misconduct or
gross negligence.
Section 8.3. No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any
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Notes or the proceeds of any Notes authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture.
Section 8.4. Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5. Monies to Be Held in Trust. Subject to the provisions of
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its agents and
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence, willful misconduct or
bad faith. The Company also covenants to indemnify the Trustee in any capacity
under this Indenture and its agents and any authenticating agent for, and to
hold them harmless against, any loss, liability or expense incurred without
negligence, willful misconduct or bad faith on the part of the Trustee or such
agent or authenticating agent, as the case may be, and arising out of or in
connection with the acceptance or administration of this trust or in any other
capacity hereunder, including the costs and expenses of defending themselves
against any claim of liability in the premises. The obligations of the Company
under this Section 8.6 to compensate or indemnify the Trustee and to pay or
reimburse the Trustee for expenses, disbursements and advances shall be secured
by a lien prior to that of the Notes upon all property and funds held or
collected by the Trustee as such, except, subject to the effect of Sections 4.3
and 7.6, funds held in trust herewith for the benefit of the holders of
particular Notes prior to the date of the accrual of such unpaid compensation or
indemnifiable claim. The obligation of the Company under this Section shall
survive the satisfaction and discharge of this Indenture. The indemnification
provided in this Section 8.6 shall extend to the officers, directors, agents and
employees of the Trustee.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(h) or (i) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.
Section 8.7. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall
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deem it necessary or desirable that a matter be proved or established prior to
taking or omitting any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence, willful misconduct, recklessness and bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee, and such Officers' Certificate, in the
absence of negligence, willful misconduct, recklessness and bad faith on the
part of the Trustee, shall be full warrant to the Trustee for any action taken
or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 8.8. Conflicting Interests of Trustee. After qualification
under the Trust Indenture Act, if the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
Section 8.9. Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus (together
with its corporate parent) of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 8.10. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written
notice of such resignation to the Company and by mailing notice thereof
to the holders of Notes at their addresses as they shall appear on the
Note register. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of
which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been
so appointed and have accepted appointment sixty (60) days after the
mailing of such notice of resignation to the Noteholders, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Noteholder who has been a
bona fide holder of a Note or Notes for at least six months may,
subject to the provisions of Section 7.9, on behalf of himself and all
others similarly situated, petition any such court for the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, appoint a successor trustee.
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(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8
within a reasonable time after written request therefor by the
Company or by any Noteholder who has been a bona fide holder
of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail
to resign after written request therefor by the Company or by
any such Noteholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may by a Board resolution remove
the Trustee and appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of
which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee, or, subject to the provisions of Section
7.9, any Noteholder who has been a bona fide holder of a Note or Notes
for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee
and nominate a successor trustee which shall be deemed appointed as
successor trustee unless within ten (10) days after notice to the
Company of such nomination the Company objects thereto, in which case
the Trustee so removed or any Noteholder, upon the terms and conditions
and otherwise as in Section 8.10(a) provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this
Section 8.10 shall become effective upon acceptance of appointment by
the successor trustee as provided in Section 8.11.
Section 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the
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successor trustee, the trustee ceasing to act shall, upon payment of any amounts
then due it pursuant to the provisions of Section 8.6, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of
the trustee so ceasing to act. Upon request of any such successor trustee, the
Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a lien upon
all property and funds held or collected by such trustee as such, except for
funds held in trust for the benefit of holders of particular Notes, to secure
any amounts then due it pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, each of the Company and the former trustee shall mail or
cause to be mailed notice of the succession of such trustee hereunder to the
holders of Notes at their addresses as they shall appear on the Note register.
If the Company fails to mail such notice within ten (10) days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12. Succession by Merger, Etc. Any corporation or other
entity into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or other
entity succeeding to all or substantially all of the corporate trust business of
the Trustee (including the administration of this Indenture), shall be the
successor to the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that in
the case of any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee such corporation shall be qualified
under the provisions of Section 8.8 and eligible under the provisions of Section
8.9.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13. Limitation on Rights of Trustee as Creditor. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Notes), after qualification under the Trust Indenture Act, the Trustee
shall be subject to the provisions of the Trust
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Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1. Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2. Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the Note register or by a certificate of the
Note registrar. The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.6.
Section 9.3. Who Are Deemed Absolute Owners. The Company, the Trustee,
any authenticating agent, any paying agent, any conversion agent and any Note
registrar may deem the person in whose name such Note shall be registered upon
the Note register to be, and may treat him as, the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of, premium, if any, and interest on such Note, for
conversion of such Note and for all other purposes; and neither the Company nor
the Trustee nor any paying agent nor any conversion agent nor any Note registrar
shall be affected by any notice to the contrary. All such payments so made to
any holder for the time being, or upon his order, shall be valid, and, to the
extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Note.
Section 9.4. Company-Owned Notes Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes shall
be disregarded and deemed not to be outstanding for the purpose of any such
determination;
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provided that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent, waiver or other action only
Notes which a Responsible Officer knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 9.4 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Notes and
that the pledgee is not the Company, any other obligor on the Notes or a person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In the case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described persons; and, subject
to Section 8.1, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.
Section 9.5. Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1. Purpose of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
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(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law; or
(5) to take any other action authorized by this Indenture or
under applicable law.
Section 10.2. Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place in the Borough of Manhattan, The City of
New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting and the establishment of
any record date pursuant to Section 9.1, shall be mailed to holders of Notes at
their addresses as they shall appear on the Note register. Such notice shall
also be mailed to the Company. Such notices shall be mailed not less than twenty
(20) nor more than ninety (90) days prior to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3. Call of Meetings by Company or Noteholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place for such meeting and
may call such meeting to take any action authorized in Section 10.1, by mailing
notice thereof as provided in Section 10.2.
Section 10.4. Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5. Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in
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regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall think
fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders duly called pursuant to the provisions of Section 10.2 or 10.3
may be adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.6. Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7. No Delay of Rights by Meeting. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or
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delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Noteholders under any of the provisions of this Indenture or
of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures Without Consent of Noteholders.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of
the holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions for the benefit of the holders of
Notes, and to make the occurrence, or the occurrence and continuance,
of a default in any such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; provided, however, that in respect of any such
additional covenant, restriction or condition such supplemental
indenture may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such
default or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and
to provide for exchangeability of such Notes with the Notes issued
hereunder in fully registered form and to make all appropriate changes
for such purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture which shall
not materially adversely affect the interests of the holders of the
Notes;
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(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualifications of this Indenture under the Trust Indenture Act, or
under any similar federal statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Section 11.2. Supplemental Indentures With Consent of Noteholders. With
the consent (evidenced as provided in Article IX) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption or repurchase
thereof, impair, or change in any respect adverse to the holder of Notes, the
obligation of the Company to repurchase any Note at the option of the holder
upon the happening of a Repurchase Event, or impair or adversely affect the
right of any Noteholder to institute suit for the payment thereof, or change the
currency in which the Notes are payable, or impair or change in any respect
adverse to the Noteholders the right to convert the Notes into Common Stock
subject to the terms set forth herein, including Section 15.6, or modify the
provisions of this Indenture with respect to the subordination of the Notes in a
manner adverse to the Noteholders, without the consent of the holder of each
Note so affected, or (ii) reduce the aforesaid percentage of Notes, the holders
of which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
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case the Trustee may in is discretion, but shall not be obligated to, enter into
such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3. Effect of Supplemental Indentures. Any supplemental
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 11.4. Notation on Notes. Notes authenticated and delivered
after the execution of any supplemental indenture pursuant to the provisions of
this Article XI may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 17.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5. Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1. Company May Consolidate, Etc. on Certain Terms. The
Company shall not, directly or indirectly, consolidate with or merge with or
into any other Person or sell, lease, convey or transfer all its properties and
assets substantially as an entirety, whether in a single transaction or a series
of related transactions, to any Person or group of affiliated Persons unless:
(a) either (i) in the case of a merger or consolidation that
does not involve a transfer of all or substantially all of the Company's
properties and assets, the Company is the surviving entity or (ii) in case the
Company shall consolidate with or merge into another Person or sell, lease,
convey or transfer all its properties and assets substantially as an entirety,
whether
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in a single transaction or a series of related transactions, to any Person, the
Person formed by such consolidation or into which the Company is merged, or the
Person which acquires by sale, conveyance or transfer, or which leases the
properties and assets of the Company substantially as an entirety, shall be a
corporation, limited liability company, partnership or trust, shall be organized
and validly existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the principal of, premium, if
any, and interest (including Liquidated Damages, if any) on all of the Notes as
applicable, and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed and shall have
provided for the applicable conversion rights set forth in Section 15.6 and the
repurchase rights set forth in Article XVI;
(b) immediately after giving effect to such transaction, no
Event of Default, and no event that after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with, together with any documents
required under Article IX.
Section 12.2. Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease in accordance with Section
12.1, and, where required in accordance with Section 12.1(a) upon the assumption
by the successor corporation, by supplemental indenture, executed and delivered
to the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of Alkermes, Inc. any or all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor corporation
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver,
or cause to be authenticated and delivered, any Notes which previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the Notes
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance or lease, the person named as the "Company" in the first paragraph of
this Indenture or any successor which shall thereafter have become such in the
manner prescribed in this
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Article XII may be dissolved, wound up and liquidated at any time thereafter and
such person shall be released from its liabilities as obligor and maker of the
Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.
Section 12.3. Opinion of Counsel to Be Given Trustee. The Trustee,
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1. Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes which have been destroyed, lost or stolen and in lieu of
or in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal and
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Noteholders to receive payments of
principal of and premium, if any, and interest on, the Notes and the other
rights, duties and obligations of Noteholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee and (iii) the
rights, obligations and immunities of the Trustee hereunder), and the Trustee,
on demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel as required by Section 17.5 and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred by the Trustee and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Notes.
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Section 13.2. Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any.
Section 13.3. Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, be repaid to
it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.
Section 13.4. Return of Unclaimed Monies. Subject to the requirements
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the case
may be, shall have become due and payable, shall be repaid to the Company by the
Trustee on demand and all liability of the Trustee shall thereupon cease with
respect to such monies; and the holder of any of the Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person.
Section 13.5. Reinstatement. If (i) the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the paying agent is permitted
to apply all such money in accordance with Section 13.2; provided, however, that
if the Company makes any payment of interest on or principal of any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the holders of such Notes to receive such payment from the
money held by the Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or Subsidiary,
as such, past,
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present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1. Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time following the date of original issuance of the Notes and
prior to the close of business on February 15, 2007 (except that, with respect
to any Note or portion of a Note which shall be called for redemption, such
right shall terminate, except as provided in the fifth paragraph of Section 15.2
and Section 3.4, at the close of business on the Business Day preceding the date
fixed for redemption of such Note or portion of a Note unless the Company shall
default in payment due upon redemption thereof) to convert the principal amount
of any such Note, or any portion of such principal amount which is $1,000 or an
integral multiple thereof, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted) obtained by
dividing the principal amount of the Note or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided in Section
15.2. A holder of Notes is not entitled to any rights of a holder of Common
Stock until such holder has converted his Notes to Common Stock, and only to the
extent such Notes are deemed to have been converted to Common Stock under this
Article XV. A Note with respect to which a holder has delivered a notice in
accordance with Section 16.2 regarding such holder's election to require the
Company to repurchase such holder's Notes following the occurrence of a
Repurchase Event may be converted in accordance with this Article XV only if
such holder withdraws such notice by delivering a written notice of withdrawal
to the Company prior to the close of business on last Business Day prior to the
day fixed for repurchase.
Section 15.2. Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Note in definitive form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the fifth
paragraph of this Section 15.2, and shall give written notice of conversion in
the form provided on the Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder elects to convert such Note or
such portion thereof specified in said notice. Such notice shall also state the
name or names (with address) in which the certificate or certificates for shares
of Common Stock which shall be issuable on such conversion shall be issued, and
shall be accompanied by transfer taxes, if required pursuant to Section 15.7.
Each such Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such Note,
be duly endorsed by, or be accompanied by instruments of
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transfer in form satisfactory to the Company duly executed by, the holder or his
duly authorized attorney.
In order to exercise the conversion privilege with respect to any
interest in the Global Note, the beneficial holder must complete the appropriate
instruction form for conversion pursuant to the Depositary's book-entry
conversion program, deliver by book-entry delivery an interest in the Global
Note, furnish appropriate endorsements and transfer documents if required by the
Company or the Trustee or conversion agent, and pay the funds, if any, required
by the fifth paragraph of this Section 15.2 and any transfer taxes, if required
pursuant to Section 15.7.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, but no later than three Business Days after the
conversion date, subject to compliance with any restrictions on transfer if
shares issuable on conversion are to be issued in a name other than that of the
Noteholder (as if such transfer were a transfer of the Note or Notes (or portion
thereof) so converted), the Company shall issue and shall deliver to such holder
at the office or agency maintained by the Company for such purpose pursuant to
Section 5.2, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such Note or portion thereof in
accordance with the provisions of this Article and a check or cash in respect of
any fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 15.3 (which payment, if any, shall be paid no
later than five Business Days after satisfaction of the requirements for
conversion set forth above). In case any Note of a denomination greater than
$1,000 shall be surrendered for partial conversion, and subject to Section 2.3,
the Company shall execute and the Trustee shall authenticate and deliver to the
holder of the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Business Day preceding such interest
payment date shall (unless such Note or portion thereof being converted shall
have been called for redemption pursuant to a redemption notice mailed to the
Noteholders in accordance with Section 3.2) be accompanied by payment, in New
York Clearing House funds or other funds acceptable to the Company, of an amount
equal to the interest otherwise payable on such interest payment date on the
principal amount being converted; provided, however, that no such payment need
be made if there shall exist at the time
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of conversion a default in the payment of interest on the Notes. Except as
provided above in this Section 15.2, no adjustment shall be made for interest
accrued on any Note converted or for dividends on any shares issued upon the
conversion of such Note as provided in this Article.
Upon the conversion of an interest in the Global Note, the Trustee, or
the Custodian at the direction of the Trustee, shall make a notation on the
Global Note as to the reduction in the principal amount represented thereby.
Section 15.3. Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the current market value
thereof to the holder of Notes. The current market value of a share of Common
Stock shall be the Closing Price on the first Trading Day immediately preceding
the day on which the Notes (or specified portions thereof) are deemed to have
been converted and such Closing Price shall be determined as provided in Section
15.5(h).
Section 15.4. Conversion Price. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article XV.
Section 15.5. Adjustment of Conversion Price. The Conversion Price
shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make
a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date (as defined in
Section 15.5(h)) fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the Record Date. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price
which would then be in effect if such dividend or distribution had not
been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for
the determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price
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per share less than the Current Market Price (as defined in Section
15.5(h)) on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect at the opening of business
on the date after such Record Date by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close
of business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common
Stock outstanding on the close of business on the Record Date plus the
total number of additional shares of Common Stock so offered for
subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are
not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been
made on the basis of delivery of only the number of shares of Common
Stock actually delivered. In the event that such rights or warrants are
not so issued, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such date fixed for
the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights
or warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall be
split or subdivided into a greater number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions
to which Section 15.5(a) applies) or evidences of its indebtedness,
cash or other assets (including securities, but excluding (1) any
rights or warrants referred to in Section 15.5(b) and, (2) dividends
and distributions (A) in connection with the liquidation, dissolution
or winding up of the Company or paid (B) exclusively in cash and (3)
any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 15.6
applies) (the foregoing
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hereinafter in this Section 15.5(d) called the "Securities")), unless
the Company elects to reserve such Securities for distribution to the
Noteholders upon conversion of the Notes so that any such holder
converting Notes will receive upon such conversion, in addition to the
shares of Common Stock to which such holder is entitled, the amount and
kind of such Securities which such holder would have received if such
holder had converted its Notes into Common Stock immediately prior to
the Record Date (as defined in Section 15.5(h) for such distribution of
the Securities) then, in each such case, the Conversion Price shall be
reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to the
close of business on the Record Date (as defined in Section 15.5(h))
with respect to such distribution by a fraction of which the numerator
shall be the Current Market Price (determined as provided in Section
15.5(h)) on such date less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) on such date of the portion of the
Securities so distributed applicable to one share of Common Stock and
the denominator shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on the
day following the Record Date; provided, however, that in the event the
then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Record Date,
in lieu of the foregoing adjustment, adequate provision shall be made
so that each Noteholder shall have the right to receive upon conversion
of a Note (or any portion thereof) the amount of Securities such holder
would have received had such holder converted such Note (or portion
thereof) immediately prior to such Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be
in effect if such dividend or distribution had not been declared. If
the Board of Directors determines the fair market value of any
distribution for purposes of this Section 15.5(d) by reference to the
actual or when issued trading market for any securities comprising all
or part of such distribution, it must in doing so consider the prices
in such market over the same period (the "Reference Period") used in
computing the Current Market Price pursuant to Section 15.5(h) to the
extent possible, unless the Board of Directors in a board resolution
determines in good faith that determining the fair market value during
the Reference Period would not be in the best interest of the
Noteholder.
In the event that the Company implements a stockholder rights
plan, such rights plan shall provide that upon conversion of the Notes
the holders will receive, in addition to the Common Stock issuable upon
such conversion, the rights issued under such rights plan
(notwithstanding the occurrence of an event causing such rights to
separate from the Common Stock at or prior to the time of conversion).
Any distribution of rights or warrants pursuant to a stockholder rights
plan complying with the requirements set forth in the immediately
preceding sentence of this paragraph shall not constitute a
distribution of rights or warrants for the purposes of this Section
15.5(d).
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
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occurrence of a specified event or events ("Trigger Event"): (i) are
deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances
of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5(d) (and no adjustment to the Conversion
Price under this Section 15.5(d) will be required) until the occurrence
of the earliest Trigger Event. If such right or warrant is subject to
subsequent events, upon the occurrence of which such right or warrant
shall become exercisable to purchase different securities, evidences of
indebtedness or other assets or entitle the holder to purchase a
different number or amount of the foregoing or to purchase any of the
foregoing at a different purchase price, then the occurrence of each
such event shall be deemed to be the date of issuance and record date
with respect to a new right or warrant (and a termination or expiration
of the existing right or warrant without exercise by the holder
thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other
event (of the type described in the preceding sentence) with respect
thereto, that resulted in an adjustment to the Conversion Price under
this Section 15.5(d), (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Price shall be readjusted upon such
final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price
received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants all of
which shall have expired or been terminated without exercise, the
Conversion Price shall be readjusted as if such rights and warrants had
never been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and
(b), any dividend or distribution to which this Section 15.5(d) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 15.5(b) applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets,
shares of capital stock, rights or warrants other than such shares of
Common Stock or rights or warrants to which Section 15.5(b) applies
(and any Conversion Price reduction required by this Section 15.5(d)
with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (and any further Conversion
Price reduction required by Sections 15.5(a) and (b) with respect to
such dividend or distribution shall then be made, except (A) the Record
Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 15.5(a)
and as "the date fixed for the determination of stockholders entitled
to receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or
warrants" and "such Record Date" within the meaning of Section 15.5(b)
and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business
on the date fixed for such determination" within the meaning of Section
15.5(a).
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(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash
that is distributed upon a merger or consolidation to which Section
15.6 applies or as part of a distribution referred to in Section
15.5(d)), in an aggregate amount that, combined together with (1) the
aggregate amount of any other such distributions to all holders of its
Common Stock made exclusively in cash within the twelve (12) months
preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to this Section 15.5(e) has been made, and
(2) the aggregate of any cash plus the fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) of consideration payable in respect of
any tender offer by the Company or any of its Subsidiaries for all or
any portion of the Common Stock concluded within the twelve (12) months
preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 15.5(f) has been made, exceeds
10% of the product of the Current Market Price (determined as provided
in Section 15.5(h)) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on
such date, then, and in each such case, immediately after the close of
business on such date, the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the close of business on such
Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10% and
(y) the number of shares of Common Stock outstanding on the Record Date
and (ii) the denominator of which shall be equal to the Current Market
Price on such date; provided, however, that in the event the portion of
the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price of the Common Stock
on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to
receive upon conversion of a Note (or any portion thereof) the amount
of cash such holder would have received had such holder converted such
Note (or portion thereof) immediately prior to such Record Date. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or distribution had not
been declared. Any cash distribution to all holders of Common Stock as
to which the Company makes the election permitted by Section 15.5(n)
and as to which the Company has complied with the requirements of such
Section shall be treated as not having been made for all purposes of
this Section 15.5(e)).
(f) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall
require the payment to shareholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) that combined
together with (1) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration
of such tender offer,
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of consideration payable in respect of any other tender offers, by the
Company or any of its Subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to
this Section 15.5(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made
exclusively in cash within twelve (12) months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to
Section 15.5(e) has been made, exceeds 10% of the product of the
Current Market Price (determined as provided in Section 15.5(h)) as of
the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number
of shares of Common Stock outstanding (including any tendered shares)
on the Expiration Time, then, and in each such case, immediately prior
to the opening of business on the day after the date of the Expiration
Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time multiplied by the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) on the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be
in effect if such tender offer had not been made. If the application of
this Section 15.5(f) to any tender offer would result in an increase in
the Conversion Price, no adjustment shall be made for such tender offer
under this Section 15.5(f). Any cash distribution to all holders of
Common Stock as to which the Company has made the election permitted by
Section 15.5(n) and as to which the Company has complied with the
requirements of such Section shall be treated as not having been made
for all purposes of this Section 15.5(f).
(g) In case of a tender or exchange offer made by a person
other than the Company or any Subsidiary for an amount which increases
the offeror's ownership of Common Stock to more than 25% of the Common
Stock outstanding and shall involve the payment by such person of
consideration per share of Common Stock having a fair market value (as
determined by the Board of Directors), whose determination shall be
conclusive, and described in a resolution of the Board of Directors at
the last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it shall have been
amended) that exceeds the Current Market Price of
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the Common Stock on the Trading Day next succeeding the Expiration
Time, and in which, as of the Expiration Time the Board of Directors is
not recommending rejection of the offer, the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) on the Expiration Time multiplied by the current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased
Shares) on the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the opening of
business on the day following the Expiration Time. In the event that
such person is obligated to purchase shares pursuant to any such tender
or exchange offer, but such person is permanently prevented by
applicable law from effecting any such purchases or all such purchases
are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender or
exchange offer had not been made. Notwithstanding the foregoing, the
adjustment described in this Section 15.5(g) shall not be made if, as
of the Expiration Time, the offering documents with respect to such
offer disclose a plan or intention to cause the Company to engage in
any transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any securities on
any day shall mean the closing sale price regular way on such
day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case on the Nasdaq National Market or New York
Stock Exchange, as applicable, or, if such security is not
listed or admitted to trading on such Nasdaq National Market
or New York Stock Exchange, on the principal national security
exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked
prices of such security on the over-the-counter market on the
day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution.
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(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
(10) consecutive Trading Days immediately prior to the date in
question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs during such ten
(10) consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (2) if the "ex" date
for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
(e), (f) or (g) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior
to the day in question, the Closing Price for each Trading Day
on and after the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Conversion Price is so required
to be adjusted as a result of such other event, and (3) if the
"ex" date for the issuance or distribution requiring such
computation is prior to the day in question, after taking into
account any adjustment required pursuant to clause (1) or (2)
of this proviso, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value (as determined by
the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 15.5(d),
(f) or (g), whose determination shall be conclusive and
described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For
purposes of any computation under Sections 15.5(f) or (g), the
Current Market Price of the Common Stock on any date shall be
deemed to be the average of the daily Closing Prices per share
of Common Stock for such day and the next two succeeding
Trading Days; provided, however, that if the "ex" date for any
event (other than the tender offer requiring such computation)
that requires an adjustment to the Conversion Price pursuant
to Section 15.5(a), (b), (c), (d), (e), (f) and (g) occurs on
or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question,
the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result
of such other event. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the
right to receive such issuance or distribution, (2) when used
with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes
effective, and (3) when
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used with respect to any tender or exchange offer means the
first date on which the Common Stock trades regular way on
such exchange or in such market after the Expiration Time of
such offer. Notwithstanding the foregoing, whenever successive
adjustments to the Conversion Price are called for pursuant to
this Section 15.5, such adjustments shall be made to the
Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 15.5 and to avoid unjust
or inequitable results as determined in good faith by the
Board of Directors.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national security exchange, a day on
which the New York Stock Exchange or another national security
exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on
which trades may be made thereon or (z) if the applicable
security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or
obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b), (c),
(d), (e), (f) and (g), as the Board of Directors considers to be
advisable to avoid or diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any
period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of Directors
shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive
and described in a Board Resolution. Whenever the Conversion Price is
reduced pursuant to the preceding sentence, the Company shall mail to
the holder of each Note at his last address appearing on the Note
register provided for in Section 2.5 a notice of the reduction at least
fifteen
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(15) days prior to the date the reduced Conversion Price takes effect,
and such notice shall state the reduced Conversion Price and the period
during which it will be in effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which
by reason of this Section 15.5(j) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article XV shall be made by the Company and
shall be made to the nearest cent or to the nearest one hundredth of a
share, as the case may be. No adjustment need be made for a change in
the par value or no par value of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee, and any
conversion agent other than the Trustee, an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Unless
and until a Responsible Officer of the Trustee shall have received such
Officers' Certificate, the Trustee shall not be deemed to have
knowledge of any adjustment of the Conversion Price and may assume
without inquiry that the last Conversion Price of which it has
knowledge remains in effect. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of
the Conversion Price setting forth the adjusted Conversion Price and
the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Conversion Price to the holder of each
Note at his last address appearing on the Note register provided for in
Section 2.5, within twenty (20) days of the effective date of such
adjustment. Failure to deliver such notice shall not effect the
legality or validity of any such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for
an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Note converted after such Record Date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying
to such holder any amount in cash in lieu of any fraction pursuant to
Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(n) In lieu of making any adjustment to the Conversion Price
pursuant to Section 15.5(e), the Company may elect to reserve an amount
of cash for distribution to the holders of the Notes upon the
conversion of the Notes so that any such holder converting Notes will
receive upon such conversion, in addition to the shares of Common
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Stock and other items to which such holder is entitled, the full amount
of cash which such holder would have received if such holder had,
immediately prior to the Record Date for such distribution of cash,
converted its Notes into Common Stock, together with any interest
accrued with respect to such amount, in accordance with this Section
15.5(n). The Company may make such election by providing an Officers'
Certificate to the Trustee to such effect on or prior to the payment
date for any such distribution and depositing with the Trustee on or
prior to such date an amount of cash equal to the aggregate amount the
holders of the Notes would have received if such holders had,
immediately prior to the Record Date for such distribution, converted
all of the Notes into Common Stock. Any such funds so deposited by the
Company with the Trustee shall be invested by the Trustee in marketable
obligations issued or fully guaranteed by the United States government
with a maturity not more than three (3) months from the date of
issuance. Upon conversion of Notes by a holder, the holder will be
entitled to receive, in addition to the Common Stock issuable upon
conversion, an amount of cash equal to the amount such holder would
have received if such holder had, immediately prior to the Record Date
for such distribution, converted its Note into Common Stock, along with
such holder's pro rata share of any accrued interest earned as a
consequence of the investment of such funds. Promptly after making an
election pursuant to this Section 15.5(n), the Company shall give or
shall cause to be given notice to all Noteholders of such election,
which notice shall state the amount of cash per $1,000 principal amount
of Notes such holders shall be entitled to receive (excluding interest)
upon conversion of the Notes as a consequence of the Company having
made such election.
Section 15.6. Effect of Reclassification, Consolidation, Merger or
Sale. If any of the following events occur, namely (i) any reclassification or
change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory
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exchange, sale or conveyance for each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-electing
shares). Such supplemental indenture shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Article. If, in the case of any such reclassification, change,
consolidation, merger, combination, sale or conveyance, the stock or other
securities and assets receivable thereupon by a holder of shares of Common Stock
include shares of stock or other securities and assets of a corporation other
than the successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or
conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the holders of the Notes as the Board of Directors shall reasonably
consider necessary by reason of the foregoing, including to the extent
practicable the provisions providing for the repurchase rights set forth in
Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7. Taxes on Shares Issued. The issue of stock certificates
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 15.8. Reservation of Shares; Shares to Be Fully Paid; Listing
of Common Stock. The Company shall provide, free from preemptive rights, out of
its authorized but unissued shares or shares held in treasury, sufficient shares
to provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be
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necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants that if at any time the Common Stock
shall be listed on any other national securities exchange or automated quotation
system the Company will, if permitted and required by the rules of such exchange
or automated quotation system, list and keep listed, so long as the Common Stock
shall be so listed on such exchange or automated quotation system, all Common
Stock issuable upon conversion of the Notes.
Section 15.9. Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist which may require any
adjustment of the Conversion Price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10. Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (that would require an adjustment in
the Conversion Price pursuant to Section 15.5); or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
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(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to
which the Company is a party and for which approval of any shareholders
of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
fifteen days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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ARTICLE XVI
REPURCHASE UPON A REPURCHASE EVENT
Section 16.1. Repurchase Right. If, at any time prior to February 15,
2007 there shall occur a Repurchase Event, then each Noteholder shall have the
right, at such holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the date (the "repurchase date") that is forty
(40) calendar days after the date of the Company Notice (as defined in Section
16.2 below) of such Repurchase Event (or, if such 40th day is not a Business
Day, the next succeeding Business Day). Such repurchase shall be made in cash at
a price equal to 105% of the principal amount of Notes such holder elects to
require the Company to repurchase, together with accrued interest, if any, to
but excluding the repurchase date (the "Repurchase Price") (or, at the option of
the Company, by delivery of Common Stock in accordance with the provisions of
Section 16.3); provided, however, that if such repurchase date is February 15 or
August 15 then the interest payable on such date shall be paid to the holder of
record of the Note on the next preceding February 1 or August 1, respectively.
No Notes may be redeemed at the option of holders upon a Repurchase Event if
there has occurred and is continuing an Event of Default, other than a default
in the payment of the Repurchase Price with respect to such Notes on the
repurchase date.
Section 16.2. Notices; Method of Exercising Repurchase Right, Etc.
(a) [intentionally omitted]
(b) Unless the Company shall have theretofore called for
redemption all of the outstanding Notes, on or before the fifteenth
(15th) calendar day after the occurrence of a Repurchase Event, the
Company or, at the written request of the Company, the Trustee, shall
mail to all holders of record of the Notes a notice (the "Company
Notice") in the form as prepared by the Company of the occurrence of
the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof. The Company shall also deliver a copy of
such Company Notice to the Trustee and cause a copy of such Company
Notice, or a summary of the information contained therein, to be
published once in a newspaper of general circulation in The City of New
York. The Company Notice shall contain the following information:
(1) the repurchase date;
(2) the date by which the repurchase right must be
exercised;
(3) the last date by which the election to require
repurchase, if submitted, must be revoked;
(4) the Repurchase Price and whether the Repurchase
Price shall be payable in cash or Common Stock and, if payable
in Common Stock, the
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method of calculating the amount of the Common Stock to be
delivered upon the repurchase as provided in Section 16.3(a);
(5) a description of the procedure which a holder
must follow to exercise a repurchase right;
(6) the Conversion Price then in effect, the date on
which the right to convert the principal amount of the Notes
to be repurchased will terminate and the place or places where
Notes may be surrendered for conversion; and
(7) the CUSIP numbers of the Notes.
No failure of the Company to give the foregoing notices or
defect therein shall limit any holder's right to exercise a repurchase
right or affect the validity of the proceedings for the repurchase of
Notes.
If any of the foregoing provisions are inconsistent with
applicable law, such law shall govern.
(c) To exercise a repurchase right, a holder shall deliver to
the Trustee on or before the thirty-fifth (35th) day after the Company
Notice was delivered (i) written notice to the Company (or agent
designated by the Company for such purpose) of the holder's exercise of
such right, which notice shall set forth the name of the holder, the
principal amount of the Notes to be repurchased, a statement that an
election to exercise the repurchase right is being made thereby, and,
in the event that the Repurchase Price shall be paid in shares of
Common Stock, the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock shall be issued,
and (ii) the Notes with respect to which the repurchase right is being
exercised, duly endorsed for transfer to the Company. Election of
repurchase by a holder shall be revocable at any time prior to, but
excluding, the repurchase date, by delivering written notice to that
effect to the Trustee prior to the close of business on the Business
Day prior to the repurchase date.
(d) If the Company fails to repurchase on the repurchase date
any Notes (or portions thereof) as to which the repurchase right has
been properly exercised, then the principal of such Notes shall, until
paid, bear interest to the extent permitted by applicable law from the
repurchase date at the rate borne by the Note and each such Note shall
be convertible into Common Stock in accordance with this Indenture
(without giving effect to Section 16.2(b)) until the principal of such
Note shall have been paid or duly provided for.
(e) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee duly endorsed for transfer to the Company
and accompanied by appropriate evidence of genuineness and authority
satisfactory to the Company and the Trustee duly executed by, the
holder thereof (or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and deliver
to the holder of
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such Note without service charge, a new Note or Notes, containing
identical terms and conditions, of any authorized denomination as
requested by such holder in aggregate principal amount equal to and in
exchange for the unrepurchased portion of the principal of the Note so
surrendered.
(f) On or prior to the repurchase date, the Company shall
deposit with the Trustee or with a paying agent (or, if the Company is
acting as its own paying agent, segregate and hold in trust as provided
in Section 5.4) the Repurchase Price in cash for payment to the holder
on the repurchase date; provided that if payment is to be made in cash,
such cash payment is made on the repurchase date it must be received by
the Trustee or paying agent, as the case may be, by 10:00 a.m., New
York City time, on such date; provided further that if the Repurchase
Price is to be paid in shares of Common Stock, such shares of Common
Stock are to be paid as promptly after the repurchase date as
practicable.
(g) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately
prior to the close of business on the repurchase date and the person or
persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such repurchase shall be
deemed to have become on the repurchase date the holder or holders of
record of the shares represented thereby; provided, however, that any
surrender for repurchase on a date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose
name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock
transfer books are open. No payment or adjustment shall be made for
dividends or distributions on any Common Stock issued upon repurchase
of any Security declared prior to the repurchase date.
(h) No fractions of shares shall be issued upon repurchase of
Notes. If more than one Note shall be repurchased from the same holder
and the Repurchase Price shall be payable in shares of Common Stock,
the number of full shares which shall be issuable upon such repurchase
shall be computed on the basis of the aggregate principal amount of the
Notes so repurchased. Instead of any fractional share of Common Stock
which would otherwise be issuable on the repurchase of any Note or
Notes, the Company will deliver to the applicable holder its check for
the current market value of such fractional share. The current market
value of a fraction of a share is determined by multiplying the current
market price of a full share by the fraction, and rounding the result
to the nearest cent. For purposes of this Section, the current market
price of a share of Common Stock is the Closing Price of the Common
Stock on the Trading Day immediately preceding the repurchase date.
(i) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Notes shall be made without charge to the
holder of Notes being repurchased for such certificates or for any tax
or duty in respect of the issuance or delivery of such certificates or
the securities represented thereby; provided, however, that the Company
shall not be required to pay any tax or duty which may be payable in
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respect of (i) income of the holder or (ii) any transfer involved in
the issuance or delivery of certificates for shares of Common Stock in
a name other than that of the holder of the Notes being repurchased,
and no such issuance or delivery shall be made unless and until the
person requesting such issuance or delivery has paid to the Company the
amount of any such tax or duty or has established, to the satisfaction
of the Company, that such tax or duty has been paid.
(j) All Notes delivered for repurchase shall be delivered to
the Trustee to be canceled in accordance with the provisions of Section
2.8.
Section 16.3. Conditions to the Company's Election to Pay the
Repurchase Price in Common Stock.
The Company may elect to pay the Repurchase Price by delivery of shares
of Common Stock pursuant to Section 16.1 if and only if the following conditions
shall have been satisfied:
(a) the shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the repurchase date of not less than
the Repurchase Price. For purposes of Section 16.1 and this Section 16.3, the
fair market value of shares of Common Stock shall be determined by the Company
and shall be equal to 95% of the average of the Closing Prices of the Common
Stock for the five consecutive Trading Days immediately preceding and including
the third Trading Day prior to the repurchase date;
(b) the Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferrable without being subject to any transfer restrictions under
the Securities Act upon repurchase and if such registration is not completed or
does not become effective prior to the repurchase date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the repurchase date;
(c) payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, or approved for quotation on the
Nasdaq National Market or listed on a national securities exchange, in either
case, prior to the repurchase date; and
(d) all shares of Common Stock which may be issued upon repurchase of
the Notes will be issued out of the Company's authorized but unissued Common
Stock and, will upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 16.3 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
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<PAGE> 85
Section 16.4. Certain Definitions. For purposes of this Article XVI:
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 and 13d-5, as in effect on the date of the
original execution of this Indenture, promulgated by the Securities and
Exchange Commission pursuant to the Exchange Act;
(b) the term "person" or "group" shall include any syndicate
or group which would be deemed to be a "person" under Section 13(d) and
14(d) of the Exchange Act as in effect on the date of the original
execution of this Indenture; and
(c) the term "Continuing Director" means at any date a member
of the Company's Board of Directors (i) who was a member of such board
on December 31, 1999 or (ii) who was nominated or elected by at least a
majority of the directors who were Continuing Directors at the time of
such nomination or election or whose election to the Company's Board of
Directors was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination
or election or such lesser number comprising a majority of a nominating
committee if authority for such nominations or elections has been
delegated to a nominating committee whose authority and composition
have been approved by at least a majority of the directors who were
continuing directors at the time such committee was formed. (Under this
definition, if the Board of Directors of the Company as of the date of
this Indenture were to approve a new director or directors and then
resign, no Change in Control would occur even though the current Board
of Directors would thereafter cease to be in office).
(d) the term "Repurchase Event" means a Change in Control or a
Termination of Trading.
(e) a "Change in Control" shall be deemed to have occurred
when (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rules 13-d3 and 13-d5 under the Exchange Act) of
shares representing more than 50% of the combined voting power of the
then outstanding securities entitled to vote generally in elections of
directors of the Company (the "Voting Stock"); (ii) approval by
stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (iii) the
Company (A) consolidates with or merges into any other corporation or
any other corporation merges into the Company, and in the case of any
such transaction, the outstanding Common Stock of the Company is
changed or exchanged into other assets or securities as a result,
unless the stockholders of the Company immediately before such
transaction own, directly or indirectly immediately following such
transaction, at least 51% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of
the Voting Stock immediately before such transaction, or (B) conveys,
transfers or leases all or substantially all of its assets to any
person; or (iv) any time Continuing Directors do not constitute a
majority of the Board of Directors of the Company (or, if applicable, a
successor corporation to the Company); provided that a Change in
Control shall not be
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deemed to have occurred if either (x) the Closing Price (as defined in
Section 15.5(h)(1) hereof) of the Common Stock for any five (5) Trading
Days during the ten (10) Trading Days immediately preceding the Change
in Control is at least equal to 105% of the Conversion Price in effect
on the date on which the Change in Control occurs or (y) in the case of
a merger or consolidation otherwise constituting a Change in Control,
all of the consideration (excluding cash payments for fractional
shares) in such merger or consolidation constituting the Change in
Control consists of common stock traded on a United States national
securities exchange or quoted on the Nasdaq National Market (or which
will be so traded or quoted when issued or exchanged in connection with
such Change in Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common
stock.
(f) a "Termination of Trading" shall have occurred if the
Common Stock (or other common stock into which the Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established
automated over-the-counter trading market in the United States.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3. Addresses for Notices, Etc. Any notice or demand which by
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Alkermes, Inc., 64 Sidney Street, Cambridge, MA 02139, Attention:
Chief Financial Officer. Any notice, direction, request or demand hereunder to
or upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if given or served by being deposited postage prepaid by
registered or certified mail in a post office letter box addressed to the
Corporate Trust Office.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4. GOVERNING LAW. THIS INDENTURE AND EACH NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK (WITHOUT REGARD TO
THE CONFLICT OF LAWS PROVISIONS THEREOF).
Section 17.5. Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for by or on behalf of the Company
in this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant provided for in this Indenture shall include (1) a
statement that the person making such certificate or opinion has read such
covenant or condition; (2) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion contained in
such certificate or opinion is based; (3) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (4) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 17.6. Legal Holidays. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest shall accrue for the
period from and after such date.
Section 17.7. No Security Interest Created. Nothing in this Indenture
or in the Notes, expressed or implied, shall be construed to constitute a
security interest under the Uniform Commercial Code or similar legislation, as
now or hereafter enacted and in effect, in any jurisdiction.
Section 17.8. Trust Indenture Act. This Indenture is hereby made
subject to, and shall be governed by, the provisions of the Trust Indenture Act
required to be part of and to govern
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indentures qualified under the Trust Indenture Act; provided, however, that,
unless otherwise required by law, notwithstanding the foregoing, this Indenture
and the Notes issued hereunder shall not be subject to the provisions of
subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the Trust Indenture Act
as now in effect as hereafter amended or modified; provided further that this
Section 17.8 shall not require that this Indenture or the Trustee be qualified
under the Trust Indenture Act prior to the time such qualification is in fact
required under the terms of the Trust Indenture Act, nor shall it constitute any
admission or acknowledgment by any party hereto that any such qualification is
required prior to the time such qualification is in fact required under the
terms of the Trust Indenture Act. If any provision hereof limits, qualifies or
conflicts with another provision hereof which is required to be included in an
indenture qualified under the Trust Indenture Act, such required provision shall
control.
Section 17.9. Benefits of Indenture. Nothing in this Indenture or in
the Notes, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 17.10. Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 17.11. Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any
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authenticating agent by giving written notice of termination to such
authenticating agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time any
authenticating agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor authenticating agent (which may be the
Trustee), shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11
shall be applicable to any authenticating agent.
Section 17.12. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
State Street Bank and Trust Company hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
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<PAGE> 90
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
ALKERMES, INC.
By: /s/ James M. Frates
--------------------------------------
Name: James M. Frates
Title: Vice President, Chief
Financial Officer and Treasurer
Attest:
/s/ Patricia L. Allen
- -------------------------------
Name: Patricia L. Allen
Title: Assistant Secretary
[seal]
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: /s/ Robert J. Dunn
--------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 1
Exhibit 4.6(a)
EXHIBIT A - FORM OF SUBORDINATED NOTE
[FORM OF FACE OF SUBORDINATED NOTE]
FORM OF LEGEND FOR GLOBAL NOTE: UNLESS THIS CERTIFICATE IS PRESENTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT); (2) AGREES THAT IT WILL NOT,
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THE NOTE EVIDENCED
HEREBY, RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE
COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (D) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT
(AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE NOTE
EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THE NOTE EVIDENCED HEREBY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF SUCH NOTE (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 2(D) ABOVE), THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND
<PAGE> 2
TRUST COMPANY, AS TRUSTEE. IF THE PROPOSED TRANSFER IS PURSUANT TO
CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE, SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON
THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO
CLAUSE 2(C) or 2(D) ABOVE OR THE EXPIRATION OF TWO YEARS FROM THE
ORIGINAL ISSUANCE NOTE EVIDENCED HEREBY.
No. ____________ $_______________
ALKERMES, INC. CUSIP: 01642T AA6
3-3/4% Convertible Subordinated Note due 2007
Alkermes, Inc., a corporation duly organized and validly existing under
the laws of the Commonwealth of Pennsylvania (herein called the "Company," which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received hereby promises to pay to
____________________, or registered assigns, the principal sum of ______
____________________________________ Dollars on February 15, 2007, and to pay
interest on said principal sum semi-annually on February 15 and August 15 of
each year, commencing on August 15, 2000, at the rate per annum specified in the
title of this Note. The interest so payable on any February 15 or August 15 will
be paid to the person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the record date, which shall be the
February 1 or August 1 (whether or not a Business Day) next preceding such
February 15 or August 15, respectively, as provided in the Indenture; provided
that any such interest not punctually paid or duly provided for shall be payable
as provided in the Indenture. Payment of the principal of and interest accrued
on this Note shall be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, which shall
initially be the office or agency of the Trustee, in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts; provided, however, that at the option
of the Company, payment of interest may be made by check mailed to the
registered address of the person entitled thereto; provided further that, with
respect to any holder of Notes with an aggregate principal amount equal to or in
excess of $2,000,000, at the request of such holder in writing to the Company,
interest on such holder's Notes shall be paid by wire transfer in immediately
available funds in accordance with the wire transfer instruction supplied by
such holder to the Trustee and paying agent (if different from the Trustee).
A-2
<PAGE> 3
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on this Note to the
prior payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF SAID STATE.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
A-3
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
ALKERMES, INC.
Dated: By: ____________________
Name:
Title:
Attest:
___________________________
[Assistant] Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
State Street Bank and Trust Company,
as Trustee
By:__________________________
Authorized Signatory
A-4
<PAGE> 5
[FORM OF REVERSE OF SUBORDINATED NOTE]
ALKERMES, INC.
3-3/4% Convertible Subordinated Note due 2007
This Note is one of a duly authorized issue of Notes of the Company,
designated as its 3-3/4% Convertible Subordinated Notes due 2007 (herein called
the " Notes"), limited to the aggregate principal amount of $250,000,000 all
issued or to be issued under and pursuant to an Indenture, dated as of February
18, 2000 (herein called the "Indenture"), between the Company and State Street
Bank and Trust Company (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes at the time outstanding, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the holders of the Notes; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Note, or reduce the rate or
extend the time of payment of interest thereon, or reduce the principal amount
thereof or premium, if any, thereon, or reduce any amount payable on redemption
or repurchase thereof, or impair or change in any respect adverse to the holders
of the Notes, the obligation of the Company to repurchase any Note at the option
of the holder upon the happening of a Repurchase Event, or impair or adversely
affect the right of any Noteholder to institute suit for the payment thereof,
change the currency in which the Notes are payable, or impair or change in any
respect adverse to the Noteholders, the right to convert the Notes into Common
Stock subject to the terms set forth in the Indenture, including Section 15.6
thereof, or modify the provisions of the Indenture with respect to the
subordination of the Notes in a manner adverse to the Noteholders without the
consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of or any redemption price of any of the Notes
or a failure by the Company to convert any Notes into Common Stock of the
Company. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and
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<PAGE> 6
owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Company may, at its option, redeem some or all of the principal of
this Note at any time prior to February 19, 2003, at a redemption price equal to
the principal amount of this Note (or any portion of such principal amount which
is $1,000 or an integral multiple thereof) plus accrued and unpaid interest on
the portion of the principal redeemed to the redemption date if (1) the closing
price of the Common Stock has exceeded 200% of the Conversion Price for at least
20 Trading Days in the consecutive 30-Trading Day period ending on the Trading
Day immediately prior to the mailing of the notice of redemption and (2) the
shelf registration statement covering resale of this Note and the Common Stock
underlying this Note is effective and expected to remain effective and available
for use for the 30 days following the redemption date.
If the Company redeems some or all of this Note prior to February 15,
2001, the Company will also make an additional payment on the redeemed portion
of this Note equal to one year of interest accrued on the principal of this Note
(or any portion hereof redeemed), minus the amount of any interest the Company
actually paid on this Note (or such portion hereof) prior to the date it mailed
the notice. The Company must make these additional payments on any Note called
for redemption, including Notes converted after the date the notice is mailed.
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<PAGE> 7
At any time on or after February 19, 2003, and prior to February 15,
2007, the Notes may be redeemed at the option of the Company as a whole, or from
time to time in part, upon mailing a notice of such redemption not less than 30
nor more than 60 days before the date fixed for redemption to the holders of
Notes at their last registered addresses, all as provided in the Indenture, at
the following optional redemption prices (expressed as percentages of the
principal amount), together in each case with accrued interest to, but
excluding, the date fixed for redemption.
If redeemed during the 12-month period beginning February 15 (beginning
February 19, 2003 through February 14, 2004, in the case of the first such
period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
<S> <C>
2003.............................................. 102.14%
2004.............................................. 101.61
2005.............................................. 101.07
2006.............................................. 100.54
</TABLE>
and 100% at February 15, 2007 and thereafter; provided, that if the date fixed
for redemption is a February 15 or August 15, then the interest payable on such
date shall be paid to the holder of record on the next preceding February 1 or
August 1.
The Notes are not subject to redemption through the operation of any
sinking fund.
Subject to the provisions of the Indenture, the holder hereof has, at
its option, the right, at any time or on or prior to the close of business on
February 15, 2007 (except that, with respect to all or any portion hereof called
for redemption, such right shall terminate except as provided in the fifth
paragraph of Section 15.2 and Section 3.4 of the Indenture at the close of
business on the Business Day preceding the date fixed for redemption (unless the
Company shall default in payment due upon redemption)), to convert the principal
hereof or any portion of such principal which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Company's
Common Stock, as said shares shall be constituted at the date of conversion,
obtained by dividing the principal amount of this Note or portion hereof to be
converted by the Conversion Price then in effect at such time, upon surrender of
this Note, together with a conversion notice as provided in the Indenture and
this Note, to the Company at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, or such other
office maintained by the Company pursuant to Section 15.2 under the Indenture,
and, unless the shares issuable on conversion are to be issued in the same name
as this Note, duly endorsed by, or accompanied by instruments of transfer in
form satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. If the holder if this Note has delivered a notice in
accordance with Section 16.2 of the Indenture regarding such holder's election
to require the Company to repurchase such holder's Notes following the
occurrence of a Repurchase Event then this Note may be converted only if such
holder withdraws such notice by delivering a written notice of withdrawal to the
Company prior to the close of business on last Business Day prior to the day
fixed for repurchase. The initial Conversion Price shall be $135.50 (equivalent
to 7.38 shares of Common Stock for each $1,000 principal amount of the Notes).
The Conversion Price of the Note is subject to adjustment as
A-7
<PAGE> 8
provided in the Indenture under certain circumstances. No adjustment in respect
of interest or dividends will be made upon any conversion; provided, however,
that if this Note shall be surrendered for conversion during the period from the
close of business on any record date for the payment of interest through the
close of business on the Business Day preceding the following interest payment
date, this Note (unless it or the portion being converted shall have been called
for redemption and a notice of redemption has been mailed to the holders of the
Notes pursuant to Section 3.2 of the Indenture) must be accompanied by payment,
in New York Clearing House funds, or other funds acceptable to the Company,
equal to the interest otherwise payable on such interest payment date on the
principal amount being converted; provided however, that no such payment need be
made if there shall exist at the time of conversion a default in the payment of
interest on the Notes. No fractional shares of Common Stock will be issued upon
any conversion, but an adjustment in cash will be paid to the holder, as
provided in the Indenture, in respect of any fraction of a share which would
otherwise be issuable upon the surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the holder of such Notes at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.
If, at any time prior to February 15, 2007 there shall occur a
Repurchase Event, then the holder of this Note shall have the right, at such
holder's option, to require the Company to repurchase all or any portion of the
Notes (in principal amounts of $1,000 or integral multiples thereof) on the date
that is forty (40) calendar days after the date of the Company Notice (or, if
such 40th day is not a Business Day, the next succeeding Business Day). A
"Repurchase Event" means either (a) a termination of trading of the Common Stock
on a national securities exchange or established automated over-the-counter
trading market in the United States or (b) a "change in control" of the Company
pursuant to one of the events set forth in the Indenture. If the holder of this
Note elects to require the Company to repurchase this Note, such repurchase
shall be made in cash at a price equal to 105% of the principal amount of this
Note redeemed, together with accrued interest, if any, applicable to such
portion, to but excluding the repurchase date (or, at the option of the Company,
by delivery of Common Stock in accordance with the provisions of Section 16.3 of
the Indenture). If the repurchase date is February 15 or August 15 then the
interest payable on such date shall be paid to the holder of record of the Note
on the next preceding February 1 or August 1, respectively. This Note may not be
redeemed upon a Repurchase Event if there has occurred and is continuing an
Event of Default, other than a default in the payment of the Repurchase Price
with respect to the Note on the repurchase date.
To exercise a repurchase right, the holder of this Note must deliver to
the Trustee on or before the thirty-fifth (35th) day after the Company Notice
was delivered (i) written notice to the Company (or agent designated by the
Company for such purpose) of the holder's exercise of such right, which notice
shall set forth the name of the holder, the principal amount of this Note to be
repurchased, a statement that an election to exercise the repurchase right is
being made thereby, and, in the event that the Repurchase Price shall be paid in
shares of Common Stock, the
A-8
<PAGE> 9
name or names (with addresses) in which the certificate or certificates for
shares of Common Stock shall be issued, and (ii) this Note, duly endorsed for
transfer to the Company. Election of repurchase by the holder of this Note shall
be revocable at any time prior to, but excluding, the repurchase date, by
delivering written notice to that effect to the Trustee prior to the close of
business on the Business Day prior to the repurchase date.
If this Note is to be repurchased only in part it shall be surrendered
to the Trustee duly endorsed for transfer to the Company and accompanied by
appropriate evidence of genuineness and authority satisfactory to the Company
and the Trustee duly executed by, the holder hereof (or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the holder of this Note without service charge, a
new Note or Notes, containing identical terms and conditions, of any authorized
denomination as requested by the holder hereof in aggregate principal amount
equal to and in exchange for the unrepurchased portion of the principal of this
Note.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or its paying agent which shall initially be State Street Bank and Trust
Company, N.A., an Affiliate of the Trustee, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith, and bearing restrictive legends required by the
Indenture.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, shareholder, employee, agent, officer, director
or subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
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<PAGE> 10
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT- Custodian
------- ----------
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with Act
right of survivorship ----------------------------------------
and not as tenants in (State)
common
Additional abbreviations may also be used
though not in the above list.
A-10
<PAGE> 11
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Alkermes, Inc.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Any amount required to be
paid to the undersigned on account of interest accompanies this Note.
Dated:___________________
__________________________________
__________________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations
and credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to be
delivered, other than to and in the name of
the registered holder.
___________________________________________
Signature Guarantee
A-11
<PAGE> 12
Fill in for registration of shares if to be
issued, and Notes if to be delivered, other
than to and in the name of the registered
holder:
_______________________________________
(Name)
_______________________________________
(Street Address)
_______________________________________
(City, State and Zip Code)
_______________________________________
Please print name and address
Principal amount to be converted (if less
than all): $______,000
__________________________________
Social Security or Other Taxpayer
Identification Number
A-12
<PAGE> 13
[FORM OF REPURCHASE NOTICE]
REPURCHASE NOTICE
To: Alkermes, Inc.
The undersigned registered owner of this Note hereby acknowledges
receipt of the Company Notice of a Repurchase Event and hereby exercises the
option to have the Company repurchase this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated for
cash, or, at the option of the Company as set forth in the Company Notice, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note. If the consideration to be received consists of cash, it shall be
delivered to the registered holder hereof. If the consideration to be received
consists of shares of Common Stock, the undersigned directs that the shares
issuable and deliverable upon such repurchase, together with any check in
payment for fractional shares and any Notes representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. If shares or any portion of
this Note not repurchased are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid to the undersigned on account of
interest accompanies this Note.
Dated:_____________________
___________________________
___________________________
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations
and credit unions) with membership in an
approved signature guarantee medallion
program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if shares of Common
Stock are to be issued, or Notes to be
delivered, other than to and in the name of
the registered holder.
____________________________________________
Signature Guarantee
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<PAGE> 14
Fill in for registration of shares if to be issued, and
Notes if to be delivered, other than to and in
the name of the registered holder:
__________________________________
(Name)
__________________________________
(Street Address)
__________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be repurchased (if less
than all): $______,000
___________________________________________
Social Security or Other Taxpayer
Identification Number
A-14
<PAGE> 15
[FORM OF ASSIGNMENT]
For value received_____________________________ hereby sell(s),
assign(s) and transfer(s) unto____________________________ (Please insert social
security or Taxpayer Identification Number of assignee) the Note, and hereby
irrevocably constitutes and appoints
________________________________________________ attorney to transfer the said
Note on the books of the Company, with full power of substitution in the
premises.
In connection with any transfer of the Note occurring within two years
of the original issuance of such Note (unless such Note is being transferred
pursuant to a registration statement that has been declared effective under the
Securities Act), the undersigned confirms that such Note is being transferred:
[ ] To Alkermes, Inc. or a subsidiary thereof; or
[ ] Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate").
[ ] The transferee is an Affiliate of the Company.
Dated:_________________________________
_______________________________________
_______________________________________
Signature(s)
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<PAGE> 16
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and
credit unions) with membership in an approved
signature guarantee medallion program
pursuant to Securities and Exchange
Commission Rule 17AD-15 if shares of Common
Stock are to be issued, or Notes are to be
delivered, other than to and in the name of
the registered holder.
____________________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the repurchase notice or the
assignment must correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change whatever.
A-16
<PAGE> 1
EXHIBIT 4.7
PURCHASE AGREEMENT
February 15, 2000
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
ING Barings LLC
J.P. Morgan Securities Inc.
PaineWebber Incorporated
SG Cowen Securities Corporation
U.S. Bancorp Piper Jaffray Inc.
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. Alkermes, Inc., a Pennsylvania corporation (the
"Company"), proposes to issue and sell to the several Initial Purchasers named
in Schedule A (the "Initial Purchasers") an aggregate of $200,000,000 principal
amount of its 3-3/4% Convertible Subordinated Notes due 2007 (the "Firm
Securities"). In addition, the Company has granted to the Initial Purchasers an
option to purchase up to an additional aggregate $50,000,000 principal amount of
its 3-3/4% Convertible Subordinated Notes due 2007 (the "Option Securities") as
provided in Section 2. The Firm Securities and, if and to the extent such option
is exercised, the Option Securities are collectively called the "Securities."
The Securities will be convertible into shares (the "Underlying Securities") of
Common Stock, $.01 par value, of the Company (the "Common Stock"). The
Securities will be issued pursuant to an Indenture (the "Indenture"), to be
dated as of February 18, 2000, between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee").
The Securities (and the Underlying Securities) will be offered without
being registered under the Securities Act of 1933, as amended, in reliance on
exemptions therefrom provided by the Act and the rules and regulations
thereunder (collectively, the "Securities Act").
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement dated the date
hereof between the Company and the Initial Purchasers (the "Registration Rights
Agreement").
In connection with the offer and sale of the Securities, the Company
has prepared a preliminary offering circular dated February 9, 2000 (the
"Preliminary Circular") and a final offering
<PAGE> 2
circular dated February 15, 2000 (the "Final Circular") for delivery to
prospective purchasers of the Securities. Each of the Preliminary Circular and
the Final Circular includes or incorporates certain information concerning,
among other things, the Company, and the Securities and the Underlying
Securities. The Final Circular also incorporates by reference each document or
report filed by the Company with the Securities and Exchange Commission (the
"Commission") pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date thereof
and prior to the termination of the distribution of the Securities as set forth
in the Final Circular. As used herein, the terms "Preliminary Circular" and
"Final Circular" shall include in each case the documents incorporated by
reference therein (the "Incorporated Documents"), and any and all supplements
and amendments to such documents incorporated by reference therein and any and
all amendments and supplements to the Preliminary Circular or the Final
Circular, as the case may be, and the term "Circular" shall include the
Preliminary Circular and the Final Circular. The terms "supplement", "amendment"
and "amend" as used herein shall include all documents deemed to be incorporated
by reference in the Preliminary Circular or Final Circular that are filed
subsequent to the date of such Circular with the Commission pursuant to the
Exchange Act.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each Initial
Purchaser that:
(a) The Circular and SEC Documents. The Preliminary Circular
does not, and the Final Circular in the form used by the Initial Purchasers to
confirm sales does not, and on the First Closing Date (as hereinafter defined)
will not, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties set forth in the immediately preceding sentence do not apply to
statements in or omissions from either Circular made in reliance upon and in
conformity with information relating to any Initial Purchaser furnished to the
Company in writing by the Initial Purchaser expressly for use therein.
(b) Exchange Act Documents. There are no contracts or other
documents required to be described in the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1999 that are not so described therein and
there are no contracts or other documents required to be filed pursuant to Item
14 of such Annual Report on Form 10-K that are not so filed. The Company is
subject to Section 13 or 15(d) of the Exchange Act. The Company has timely filed
with the Commission all the documents that the Company was required to file with
the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
(collectively, the "SEC Documents"). The SEC Documents, when they were filed
with the Commission, conformed in all material respects to the requirements of
the Exchange Act and the rules, regulations and instructions of the Commission
thereunder, and any documents so filed and incorporated by reference in any
Circular subsequent to the date hereof will, when they are filed with the
Commission, conform in all material respects to the requirements of the Exchange
Act and the rules, regulations and instructions of the Commission thereunder. No
stop order or other similar order or decree preventing the use of any Circular,
or any order or decree asserting that the transactions contemplated by this
Agreement are
-2-
<PAGE> 3
subject to the registration requirements of the Securities Act has been issued
and remains in effect and, to the best knowledge of the Company, no proceedings
for that purpose have been commenced or are contemplated.
(c) The Purchase Agreement. This purchase agreement (the
"Agreement") has been duly authorized, executed and delivered by, and is a valid
and binding agreement of, the Company, enforceable in accordance with its terms,
except insofar as indemnification, contribution and waiver provisions hereunder
may be limited by applicable law and except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
applicable fraudulent transfer laws or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(d) The Registration Rights Agreement. The Registration Rights
Agreement will have been duly authorized, executed and delivered by the Company
on the First Closing Date and will be a valid and binding agreement of the
Company, enforceable in accordance with its terms, except insofar as
indemnification, contribution and waiver provisions thereunder may be limited by
applicable law and except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, applicable fraudulent
transfer laws or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles; the Registration
Rights Agreement will conform to all material respects to the description
thereof in the Final Circular.
(e) The Indenture. The Indenture will have been duly
authorized, executed and delivered by the Company on the First Closing Date and
will be a valid and binding agreement of the Company, enforceable in accordance
with its terms, except insofar as indemnification and waiver provisions
thereunder may be limited by applicable laws and except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, applicable fraudulent transfer laws or similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles. The Indenture will conform in all material respects to the
description thereof in the Final Circular.
(f) The Securities. The Securities will have been duly and
validly authorized and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered and paid for by the Initial Purchasers
in accordance with this Agreement will be (i) valid and binding obligations of
the Company enforceable in accordance with their terms, except as to enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles, (ii)
entitled to the benefits of the Indenture, and (iii) will not be subject to any
preemptive rights, co-sale rights, rights of first refusal or other rights to
subscribe for or purchase Securities; the Securities conform in all material
respects to the description thereof contained in the Final Circular.
(g) The Underlying Securities. The Underlying Securities have
been duly authorized and reserved for issuance and, upon issuance thereof upon
conversion of the Securities in
-3-
<PAGE> 4
accordance with the terms of the Securities, will be validly issued, fully paid
and nonassessable and will be issued free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest and will not be
subject to any preemptive rights, co-sale rights, rights of first refusal or
other right subject to subscribe for or purchase securities.
(h) No Applicable Registration or Other Similar Rights. There
are no persons with registration or other similar rights to have any equity or
debt securities included in the offering or registered for sale in accordance
with the Registration Rights Agreement contemplated by this Agreement except for
such rights as have been duly waived.
(i) No Material Adverse Change. Subsequent to the respective
dates as of which information is given in the Final Circular: (i) there has been
no material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or not
arising from transactions in the ordinary course of business, of the Company and
its subsidiaries, considered as one entity, or any change which would adversely
effect the power and ability of the Company to perform its obligations under
this Agreement, the Indenture, the Registration Rights Agreement or the
Securities (any such change or effect, where the context so requires, is called
a "Material Adverse Change" or a "Material Adverse Effect"); (ii) the Company
and its subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in
the ordinary course of business; and (iii) except for the quarterly dividend
declared with respect to the Company's $3.25 Preferred Stock (as defined below)
and 1999 Preferred Stock (as defined below) in accordance with their respective
terms, there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, by any of its subsidiaries on any class of capital stock or no
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
(j) Independent Accountants. Deloitte & Touche LLP, who have
expressed their opinion with respect to the audited financial statements (which
term as used in this Agreement includes the related notes thereto) that are
incorporated by reference or included in the Final Circular, are independent
public or certified public accountants with respect to the Company under Rule
101 of the AICPA's Code of Professional Conduct and its interpretations and
rulings.
(k) Preparation of the Financial Statements. The financial
statements previously filed with the Commission that are incorporated by
reference or included in the Final Circular present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the periods
specified. Such financial statements have been prepared in conformity with
generally accepted accounting principles as applied in the United States applied
on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. The financial data set forth in
the Final Circular under the captions "Selected Consolidated Financial
Information" and "Capitalization" fairly present the information set forth
therein on a basis consistent with that of the financial statements presented
therein or incorporated by reference.
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(l) Company's Accounting System. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(m) Subsidiaries of the Company. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21 to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1999, except for Alkermes
Acquisition Corp., a Delaware corporation and Alkermes Clinical Partners, L.P.,
a Delaware limited partnership.
(n) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly organized
and is validly existing or subsisting as a corporation or limited liability
company, as the case may be, in good standing under the laws of the jurisdiction
in which it is organized (except Alkermes Europe, Ltd. or the corporations
organized in the Commonwealth of Pennsylvania) with full corporate power and
authority to own its properties and conduct its business as described in the
Final Circular, and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires such
qualification.
(o) Capitalization of the Subsidiaries. All the outstanding
shares of capital stock of each subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable, and all outstanding shares of
capital stock of the subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any security interests,
claims, liens or encumbrances.
(p) No Prohibition on Subsidiaries from Paying Dividends or
Making Other Distributions. No subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets to the
Company or any other subsidiary of the Company.
(q) Capitalization and Other Capital Stock Matters. The
authorized, issued and outstanding capital stock of the Company is as set forth
in the Final Circular under the caption "Capitalization" (other than for
subsequent issuances, if any, pursuant to employee benefit plans described in
the Final Circular or upon exercise of outstanding options or warrants described
in the Final Circular). The Common Stock (including the Underlying Securities),
the $3.25 Convertible Exchangeable Preferred Stock, $.01 par value per share, of
the Company (the "$3.25 Preferred Stock") and the 1999 Redeemable Convertible
Exchangeable Preferred Stock, $.01 par
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value per share of the Company (the "1999 Preferred Stock" and collectively with
the $3.25 Preferred Stock, the "Preferred Stock") conforms in all material
respects to the description thereof contained in the Final Circular. All of the
issued and outstanding Common Stock and Preferred Stock has been duly authorized
and validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
shares of Common Stock were issued in violation of any preemptive rights, rights
of first refusal or other similar rights to subscribe for or purchase securities
of the Company. None of the outstanding shares of Preferred Stock were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company or any
of its subsidiaries other than those described in the Final Circular. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth or
incorporated by reference in the Final Circular accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights.
(r) No Consents, Approvals or Authorizations Required. No
consent, approval, authorization, filing with or order of any court or
governmental agency or regulatory body is required in connection with the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Indenture and the Securities, except such as may be required under the
Securities Act, the Exchange Act, the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") or the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the Initial
Purchasers in the manner contemplated herein and in the Final Circular.
(s) Non-Contravention of Existing Instruments and Agreements.
The execution and delivery by the Company of, and performance of its obligations
under, this Agreement, the Registration Rights Agreement, the Indenture and the
Securities, and the consummation of the transactions herein and therein
contemplated does not and will not conflict with, or result in a breach or
violation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, (i) the charter or
by-laws of the Company or any of its subsidiaries, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which the Company or any of its subsidiaries is a party or is bound or to which
its or their property is subject or (iii) to the best knowledge of the Company,
any statute, law, rule, regulation, judgment, order or decree applicable to the
Company or any of its subsidiaries of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having jurisdiction
over the Company or any of its subsidiaries or any of its or their properties.
(t) No Defaults or Violations. Neither the Company nor any
subsidiary is in violation or default of (i) any provision of its charter or
by-laws, (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or is bound or to which its
property is subject or (iii) to the best knowledge of the Company, any statute,
law, rule, regulation,
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<PAGE> 7
judgment, order or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over the
Company or such subsidiary or any of its properties, as applicable, except any
such violation or default which would not, singly or in the aggregate, result in
a Material Adverse Change except as otherwise disclosed in the Final Circular.
(u) No Actions, Suits or Proceedings. No action, suit or
proceeding by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its subsidiaries or its or their
property is pending or, to the best knowledge of the Company, threatened that
(i) could reasonably be expected to have a Material Adverse Effect on the
performance of this Agreement or the consummation by the Company of any of the
transactions contemplated hereby or (ii) could reasonably be expected to result
in a Material Adverse Change.
(v) All Necessary Permits, Etc. The Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received any notice of proceedings relating to
the revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in a Material Adverse
Change.
(w) Title to Properties. The Company and each of its
subsidiaries has good and marketable title to all the properties and assets
reflected as owned in the financial statements included or incorporated by
reference in the Final Circular, in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such property
and do not materially interfere with the use made or proposed to be made of such
property by the Company or such subsidiary or disclosed in the Final Circular.
The real property, improvements, equipment and personal property held under
lease by the Company or any subsidiary are held under valid and enforceable
leases, with such exceptions as are not material and do not materially interfere
with the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
(x) Tax Law Compliance. The Company and its subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes shown thereon as due and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements included or incorporated by reference in the Final Circular
in respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of the Company or any of its subsidiaries
has not been finally determined. The Company is not aware of any tax deficiency
that has been or might be asserted or threatened against the Company that could
result in a Material Adverse Change.
(y) Intellectual Property Rights. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent
rights, inventions, trade secrets, know-
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<PAGE> 8
how, trademarks, service marks, trade names and copyrights which are necessary
to conduct its respective business as described in the Final Circular. The
expiration of any patents, patent rights, trademarks, service marks, trade names
or copyrights would not result in a Material Adverse Change that is not
otherwise disclosed in the Final Circular; the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights that is not disclosed in the Final Circular; and the Company
has not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse Effect
that is not described in the Final Circular. There is no claim being made
against the Company regarding patents, patent rights or licenses, inventions,
collaborative research, trade secrets, know-how, trademarks, service marks,
trade names or copyrights that is not described in the Final Circular. The
Company and its subsidiaries do not in the conduct of their business as now or
proposed to be conducted as described in the Final Circular infringe or conflict
with any right or patent of any third party, or any discovery, invention,
product or process which is the subject of a patent application filed by any
third party, known to the Company or any of its subsidiaries, which such
infringement or conflict is reasonably likely to result in a Material Adverse
Change that is not described in the Final Circular.
(z) Year 2000 Preparedness. Neither the Company nor any of its
subsidiaries has experienced any material failures of or disruptions to its
software, hardware, computer systems, peripherals or other equipment containing
date-sensitive components that were related to the arrival of the Year 2000
("Year 2000 Problems") and, to the knowledge of the Company and its
subsidiaries, none of their respective material vendors has experienced any such
material failures or disruptions related to Year 2000 Problems.
(aa) No Transfer Taxes or Other Fees; No Solicitation Fees. There
are no documentary stamp or other issuance or transfer taxes or other similar
fees or charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement, the Registration Rights Agreement, and the Indenture
or the issuance and sale by the Company of the Securities. The Company has not
paid or agreed to pay any person any compensation for soliciting another to
purchase any Securities (except as contemplated by this Agreement).
(bb) Company Not an "Investment Company". The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the "Investment Company Act"). The Company is not, and after receipt
of payment for the Securities will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(cc) Insurance. Each of the Company and its subsidiaries are
insured by recognized, financially sound and reputable institutions with
policies in such amounts and with such
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<PAGE> 9
deductibles and covering such risks as are generally deemed adequate and
customary for their respective businesses, including, but not limited to,
policies covering real and personal property owned or leased by the Company and
its subsidiaries against theft, damage, destruction and acts of vandalism,
general liability and Directors and Officers liability. The Company has no
reason to believe that it or any subsidiary will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to obtain
comparable coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and at a cost that would not result in
a Material Adverse Change. Neither of the Company nor any subsidiary has been
denied any insurance coverage which it has sought or for which it has applied.
(dd) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent.
(ee) Regulation M. The Company has not taken and will not take,
directly or indirectly, any action prohibited by Regulation M under the Exchange
Act in connection with the sale or offering of the Securities or the Underlying
Securities.
(ff) Lock-Up Agreements. Each executive officer and director of
the Company has agreed to sign an agreement substantially in the form attached
hereto as Exhibit A (the "Lock-up Agreement"). The Company has provided to
counsel for the Initial Purchasers true, accurate and complete copies of all of
the Lock-up Agreements presently in effect or effected with respect to the
offering of the Securities pursuant hereto. The Company hereby represents and
warrants that it will not release any of its officers, directors or other
stockholders from any Lock-up Agreements currently existing or hereafter
effected with respect to the offering of the Securities without the prior
written consent of FleetBoston Robertson Stephens Inc.
(gg) Related Party Transactions. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in
the Final Circular which have not been described as required.
(hh) Rule 144A Eligibility. The Firm Securities and Option
Securities satisfy the requirements set forth in Rule 144A(d)(3) under the
Securities Act for securities to be eligible for trading pursuant to Rule 144A.
(ii) No General Solicitation. Neither the Company nor any
Affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act)
of the Company, directly or through any agent or any person acting on its or
their behalf, (i) has sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, or will sell, offer for sale, solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Securities
under Rule 502(a) of Regulation D under the Securities Act in a manner that
would require the registration under the Securities Act of the Securities, or
(ii) has engaged or will engage in any form of general solicitation or general
advertising (as those terms are used in Rule 502(c) of Regulation D under the
Securities Act) in connection with the offering of the Securities, or (iii) has
engaged or will engage in any manner in a public offering in connection with the
sale of the Securities within the meaning of Section 4(2) of the Securities Act
(assuming, with
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respect to (ii) and (iii), the accuracy and completeness of the Initial
Purchasers' representations, warranties and agreements in Sections 2(f) hereof).
(jj) No Registration Required. It is not necessary in connection
with the offer, sale and delivery of any of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement to register any of the
Securities or the Underlying Securities under the Securities Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended.
(kk) Solvency. To the best knowledge of the Company, the present
fair saleable value of the assets of the Company exceeds the amount that will be
required to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company as they become absolute and
matured; the assets of the Company do not constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted, including
the capital needs of the Company, taking into account the projected capital
requirements and capital availability of the Company; the Company does not
intend to, nor does it believe that it will, incur debts beyond its ability to
pay such debts as they mature; upon the issuance of the Securities and the
application of the proceeds thereof as contemplated by the Final Circular, the
present fair saleable value of the assets of the Company will exceed the amount
that will be required to be paid on or in respect of the existing debts and
other liabilities (including contingent liabilities) of the Company as they
become absolute and matured; the assets of the Company, upon the issuance of the
Securities and the application of the proceeds thereof as contemplated by the
Final Circular, will not constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted, including the capital
needs of the Company, taking into account the projected capital requirements and
capital availability of the Company.
(ll) No Unlawful Contributions or Other Payments. Neither the
Company nor any of its subsidiaries nor, to the best of the Company's knowledge,
any employee or agent of the Company or any subsidiary, has made, in the last
five years, any contribution or other payment to any official of, or candidate
for, any federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Final Circular.
(mm) Environmental Laws. Except as otherwise disclosed in the
Final Circular, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of public health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, (iii) based on present business plans, the Company will not
be required to make future material capital expenditures to comply with
Environmental Laws presently in effect and (iv) no property which is owned,
leased or occupied by the Company has been designated as a Superfund site
pursuant to the Comprehensive Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. Section 9601, et seq.), or otherwise designated as a
contaminated site under applicable state or local law.
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<PAGE> 11
(nn) Periodic Review of Costs of Environmental Compliance. In the
ordinary course of its business, the Company conducts a periodic review of the
effect of Environmental Laws on the business, operations and properties of the
Company and its subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review and the amount of its established
reserves, the Company has reasonably concluded that such associated costs and
liabilities would not, individually or in the aggregate, have a Material Adverse
Effect.
(oo) ERISA Compliance. Each "employee benefit plan" (within the
meaning of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA") established or maintained by the Company, a subsidiary
or their "ERISA Affiliates" (as defined below) (collectively the "Plans") is in
compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a subsidiary, any member of any group of organizations
described in section 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. Neither the
Company, a subsidiary nor any ERISA Affiliate has ever contributed to,
contributes to, been required to contribute to or has any liability with respect
to any employee benefit plan subject to Title IV of ERISA, section 412 of the
Code or section 302 of ERISA. Each of the Plans established or maintained by the
Company, a subsidiary or any of their ERISA Affiliates that is intended to be
qualified under section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification. Neither the Company, a subsidiary nor any of their ERISA
Affiliates has incurred or reasonably expects to incur any liability under
section 4975 or 4980B of the Code. There are no actions, suits or claims
pending, threatened or to the Company's knowledge, anticipated (other than
routine claims for benefits) against any of the Plans, their assets or their
fiduciaries.
(pp) The Common Stock is registered pursuant to Section 12(g) of
the Exchange Act and is listed on the Nasdaq National Market and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the National Association of Securities
Dealers, Inc. ("NASD") is contemplating terminating such registration or
listing.
Any certificate signed by an officer of the Company and delivered
to FleetBoston Robertson Stephens Inc. on behalf of the Initial Purchasers or to
counsel for the Initial Purchasers shall be deemed to be a representation and
warranty by the Company to each Initial Purchaser as to the matters set forth
therein.
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) The Firm Securities. You have advised the Company that you
have made and will make an offering of the Firm Securities purchased by you
hereunder on the terms to be set forth in the Final Circular and in this
Agreement, as soon after this Agreement is entered into as in your judgment is
advisable. On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Initial
Purchasers agree, severally and not jointly, to purchase from the Company
$200,000,000 aggregate principal amount of Firm Securities set forth opposite
their respective names on Schedule A attached hereto at a purchase price of
97.0%of the principal amount thereof (the "Purchase Price") plus accrued
interest if any, from February 15, 2000 to the date of payment and delivery.
Delivery of definitive notes for the Firm Securities to be
purchased by the Initial Purchasers and payment therefor shall be made by the
Company and the Initial Purchasers at the offices of Testa, Hurwitz & Thibeault,
LLP (or at such other place as may be agreed upon among the Initial Purchasers
and the Company), at 10:00 A.M., Boston time, (i) on the third (3rd) full
business day following the first day that Securities are traded, (ii) if this
Agreement is executed and delivered after 4:30 p.m., Boston time, the fourth
(4th) full business day following the day that this Agreement is executed and
delivered or (iii) at such other time and date not later than seven (7) full
business days following the first day that Securities are traded as the Initial
Purchasers and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "First
Closing Date"; provided, however, that if the Company has not made available to
the Initial Purchasers copies of the Final Circular within the time provided in
Section 2(e) hereof, the Initial Purchasers may, in their sole discretion,
postpone the First Closing Date until no later that two (2) full business days
following delivery of copies of the Final Circular to the Initial Purchasers.
The notes (including one or more global certificates), if any, for the Firm
Securities to be so delivered will be made available to FleetBoston Robertson
Stephens Inc. at such office or at such other location including, without
limitation, in New York City, as FleetBoston Robertson Stephens Inc. may
reasonably request for checking at least one (1) full business day prior to the
First Closing Date and will be in such names and denominations as FleetBoston
Robertson Stephens Inc. may request, such request to be made at least two (2)
full business days prior to the First Closing Date. To the extent that the
Initial Purchasers so elect, delivery of the Firm Securities held in global
notes may be made by credit through full fast transfer to the accounts at The
Depository Trust Company ("DTC") designated by the Initial Purchasers.
(b) The Option Securities; the Second Closing Date. In addition,
on the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Initial Purchasers to purchase, severally
and not jointly, up to $50,000,000 aggregate principal amount of of Option
Securities from the Company at the Purchase Price plus accrued interest, if any,
from the date of the Option Securities exercise notice to the date of payment
and delivery to be paid by the Initial Purchasers for the Option Securities. The
option granted hereunder may be exercised at any time upon notice by the Initial
Purchasers to the Company which notice may be given at any time within
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45 days from the date of this Agreement. The time and date of delivery of the
Option Securities, if subsequent to the First Closing Date, is called the
"Second Closing Date" and shall be determined by the Initial Purchasers and
shall not be earlier than three nor later than five full business days after
delivery of such notice of exercise. If any Option Securities are to be
purchased, each Initial Purchaser agrees, severally and not jointly, to purchase
the principal amount of Option Securities (subject to such adjustments to
eliminate fractional notes as the Initial Purchasers may determine) that bears
the same proportion to the total principal amount of Option Securities to be
purchased as the principal amount of Firm Securities set forth on Schedule A
opposite the name of such Initial Purchaser bears to the total principal amount
of Firm Securities.
The notes (including one or more global notes), if any, for the
Option Securities so to be delivered will be made available to FleetBoston
Robertson Stephens Inc. at such office or other location including, without
limitation, in New York City, as FleetBoston Robertson Stephens Inc. may
reasonably request for checking at least one (1) full business day prior to the
date of payment and delivery and will be in such names and denominations as
FleetBoston Robertson Stephens Inc. may request, such request to be made at
least two (2) full business days prior to such date of payment and delivery. To
the extent that the Initial Purchasers so elect, delivery of the Option
Securities in global form may be made by credit through full fast transfer to
the accounts at DTC designated by the Initial Purchasers.
(c) Exercise of Option. Upon exercise of any option provided for
in Section 2(b) hereof, the obligations of the Initial Purchasers to purchase
such Option Securities will be subject (as of the date hereof and as of the date
of payment for such Option Securities) to the accuracy of and compliance with
the representations and warranties of the Company herein, to the accuracy of the
statements of the Company and officers of the Company on the Company's behalf
made pursuant to the provisions hereof, to the performance by the Company of its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement and the Firm Securities and the Option Securities, and to the
condition that all proceedings taken at or prior to the Second Closing Date in
connection with the sale and transfer of such Option Securities shall be
satisfactory in form and substance to you and to Initial Purchasers' counsel,
and you shall have been furnished with all such documents, certificates and
opinions as you may request in order to evidence the accuracy and completeness
of any of the representations, warranties or statements, the performance of any
of the covenants of the Company or the compliance with any of the conditions
herein contained.
(d) Payment for the Securities. Payment for the Securities shall
be made at the First Closing Date (and, if applicable, at the Second Closing
Date) by wire transfer in immediately available-funds to the order of the
Company.
It is understood that FleetBoston Robertson Stephens Inc. has
been authorized, for its own account and the accounts of the Initial Purchasers,
to accept delivery of and receipt for, and make payment of the Purchase Price
for, the Firm Securities and any Option Securities the Initial Purchasers have
agreed to purchase. FleetBoston Robertson Stephens Inc., individually and not as
the representative of the Initial Purchasers, may (but shall not be obligated
to) make payment for any Securities to be purchased by any Initial Purchaser
whose funds shall not have been received by
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<PAGE> 14
FleetBoston Robertson Stephens Inc. by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Initial Purchaser, but
any such payment shall not relieve such Initial Purchaser from any of its
obligations under this Agreement.
(e) Delivery of Final Circular to the Initial Purchasers. Not
later than 12:00 noon on the second business day following the date the
Securities are released by the Initial Purchasers for sale to the investors, the
Company shall deliver or cause to be delivered copies of the Final Circular in
such quantities and at such places and FleetBoston Robertson Stephens Inc. shall
request.
(f) Initial Purchaser Representations. Each Initial Purchaser
represents and warrants that such Initial Purchaser is an accredited investor as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act (an "Institutional Accredited Investor"). The Initial Purchasers agree with
the Company that (a) it has not solicited and will not solicit offers for, or
offer or sell, any Securities by any form of general solicitation or general
advertising (as those terms are used in Rule 502(c) of Regulation D under the
Securities Act) or engage in any manner in a public offering in connection with
the sale of the Securities within the meaning of Section 4(2) of the Securities
Act (assuming the accuracy and completeness of the Company's representations,
warranties and compliance with its agreements in Sections 1(ii), 3(d) and 3(e)
hereof), and (b) it has solicited and will solicit offers for the Securities
only from, and has offered and will offer and sell the Securities only to,
persons that it reasonably believes to be qualified institutional buyers, as
defined in Rule 144A(a)(1) under the Securities Act ("QIBs").
SECTION 3. COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each Initial Purchaser as
follows:
(a) Amendments and Supplements to the Final Circular. If, during
such period after the date hereof and prior to the date on which all of the
Securities shall have been sold by the Initial Purchasers, any event shall occur
or condition exist as a result of which it is necessary in the judgment of the
Company or in the reasonable opinion of the Initial Purchasers or counsel for
the Initial Purchasers to amend or supplement the Final Circular in order to
make the statements therein, in the light of the circumstances existing at the
time the Final Circular is delivered to a purchaser, not misleading, or if it is
necessary at any time to amend or supplement the Final Circular to comply with
any law, the Company promptly will prepare and furnish, at its own expense, to
the Initial Purchasers, an appropriate amendment to the Final Circular so that
the Final Circular as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Final
Circular, will comply with the law.
(b) Blue Sky Compliance. The Company will cooperate with the
Initial Purchasers and counsel for the Initial Purchasers in endeavoring to
qualify the Securities for sale under the securities laws of such jurisdictions
(both national and foreign) as the Initial Purchasers may reasonably have
designated in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of
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process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Initial Purchasers may
reasonably request for distribution of the Shares.
(c) Copies of any Amendments and Supplements to each Circular.
The Company (i) has furnished to you copies of the Preliminary Circular and (ii)
will furnish to you copies of the Final Circular within the time period
specified in Section 2(e) of this Agreement, any documents incorporated by
reference therein and any amendments or supplements to such documents, all in
such quantities as you may from time to time reasonably request until all of the
Securities shall have been sold by the Initial Purchasers.
(d) No Integration. Neither the Company nor any Affiliate has
sold, offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in the Securities Act) or will do any of the
foregoing which could be integrated with the sale of any of the Securities under
Rule 502(a) of Regulation D under the Securities Act in a manner which would
require the registration under the Securities Act of such Securities.
(e) No General Solicitation. Neither the Company nor any
Affiliate has solicited or will solicit any offer to buy or offer to sell any of
the Securities by means of any form of general solicitation or general
advertising (as those terms are used in Rule 502(c) of Regulation D under the
Securities Act) or has engaged or will engage in any manner in a public offering
in connection with the sale of the Securities within the meaning of Section 4(2)
of the Securities Act.
(f) Rule 144A Information. To the extent that any Securities or
Underlying Securities remain outstanding and are "restricted securities" within
the meaning of Rule 144 under the Securities Act, during the two year period
following the First Closing Date (or, if later, the Second Closing Date) and
during the two-year period following the sale of any such Security or Underlying
Security, as the case may be, by an Affiliate of the Company (for purposes of
this Section 3(f) only, as such term is defined in Rule 144(a)(1) under the
Securities Act), the Company will make available, upon request, to any seller of
such Securities or Underlying Securities, as the case may be, the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to and in compliance with Section 13 or 15(d) of the Exchange Act.
(g) Designation for Trading in The Portal Market. The Company
will use its best efforts to permit the Securities to be designated securities
eligible for trading in The Portal Market in accordance with the rules and
regulations adopted by the NASD relating to trading in The Portal Market and to
permit the Securities to be eligible for clearance and settlement through DTC.
(h) Agreement by Company Not to Offer or Sell Additional
Securities. The Company will not, without the prior written consent of
FleetBoston Robertson Stephens Inc., for a period of 90 days following the date
of the Final Circular (the "Lock-Up Period"), offer, sell or contract to sell,
or otherwise dispose of or enter into any transaction which is designed to, or
could be expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise by the
Company or any affiliate of the Company or
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<PAGE> 16
any person in privity with the Company or any Affiliate of the Company) directly
or indirectly, or announce the offering of, any other Common Stock or any
securities convertible into, or exchangeable for, Common Stock; provided,
however, that the Company may (i) issue and sell Common Stock pursuant to any
director, employee, consultant or other duly authorized stock option plan, stock
ownership plan or dividend reinvestment plan of the Company in effect at the
date of the Final Circular and described in the Final Circular and (ii) the
Company may issue Common Stock issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Final Circular and described
in the Final Circular.
(i) Reservation of Underlying Securities. The Company will at all
times reserve and keep available, free of any preemptive rights, co-sale rights,
registration rights, rights of first refusal, other rights to subscribe for or
purchase securities or other rights of security holders similar to any of the
foregoing, out of its authorized but unissued Common Stock, for the purpose of
effecting the conversion of the Securities into the Underlying Securities, the
full number of shares of Underlying Securities issuable upon the conversion of
all outstanding Securities.
(j) Use of Proceeds. The Company shall apply the net proceeds
from the sale of the Securities sold by it in the manner described under the
caption "Use of Proceeds" in the Final Circular.
(k) Legends placed on the Securities. The Company will ensure
that each note representing any Securities bears the legend required by the
Indenture, if any.
(l) Legends placed on the Underlying Securities. The Company will
ensure that each stock certificate representing Underlying Securities bears the
legend required by the Indenture, if any.
(m) Lock-Up Agreements. The Company will not release any of its
executive officers or directors from any Lock-up Agreements currently existing
or hereafter effected with respect to the offering of the Securities without the
prior written consent of FleetBoston Robertson Stephens.
(n) Removal of Legends. In connection with any disposition of
Securities or Underlying Securities pursuant to a transaction made in compliance
with applicable state securities laws and (i) satisfying the requirements of
Rule 144(k) under the Securities Act, (ii) made pursuant to an effective
registration statement under the Securities Act or (iii) disposed of in any
other transaction that does not require registration under the Securities Act,
the Company will reissue notes or certificates evidencing such Securities or
Underlying Securities without the legends referred to in Section 3(k) or 3(l)
hereof (provided, in the case of a transaction specified in clause (iii) above,
that the legal opinion referred to in the applicable legend supports the removal
of such legends).
(o) DTC Compliance. The Company agrees to comply with all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "book-entry" transfer.
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<PAGE> 17
(p) Notice of Subsequent Events. If at any time during the ninety
(90) day period after the date hereof, any rumor, publication or event relating
to or affecting the Company shall occur as a result of which in your opinion the
market price of the Company Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Final Circular), the Company will, after
written notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of and disseminate
a press release or other public statement, reasonably satisfactory to you,
responding to or commenting on such rumor, publication or event.
SECTION 4. CONDITIONS OF OBLIGATIONS OF THE INITIAL PURCHASERS. The
obligations of the Initial Purchasers to purchase and pay for the Firm
Securities and Option Securities as provided herein, shall be subject to the
accuracy, as of the date hereof and the First Closing Date or the Second Closing
Date, as the case may be, of the representations and warranties of the Company
herein, to the performance by the Company of its obligations hereunder and to
each of the following additional conditions:
(a) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date or the Second
Closing Date, as the case may be:
(i) there shall not have been any Material Adverse Change in
the condition (financial or otherwise), earnings, business, operations or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Final Circular that, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to market the Firm Securities or Option Securities
as contemplated in the Final Circular.
(b) Corporate Proceedings. All corporate proceedings and other
legal matters in connection with this Agreement, the Registration Rights
Agreement, the Indenture, the form of Preliminary Circular and Final Circular,
and the authorization, issue, sale and delivery of the Firm Securities and the
Option Securities shall have been reasonably satisfactory to Initial Purchasers'
counsel and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) Opinion of Counsel for the Company. You shall have received
on the First Closing Date or on the Second Closing Date, as the case may be, an
opinion of Ballard Spahr Andrews & Ingersoll, LLP, counsel for the Company,
substantially in the form of Exhibit B attached hereto, dated the First Closing
Date or the Second Closing Date, as the case may be, addressed to the Initial
Purchasers and with reproduced copies or signed counterparts thereof for each of
the Initial Purchasers.
Counsel rendering the opinion contained in Exhibit B may rely as
to questions of law not involving the laws of the United States (exclusive of
patent law) or the Commonwealth of Pennsylvania and State of New York as to the
validity and enforceability of Securities, Indenture and
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<PAGE> 18
Registration Rights Agreement upon opinions of local counsel, and as to
questions of fact upon representations or certificates of officers of the
Company and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in such opinions, representations or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Initial Purchasers of the Initial Purchasers, and to the
Initial Purchasers' counsel.
(d) Opinion of Patent Counsel for the Company. You shall have
received on the First Closing Date, or the Second Closing Date, as the case may
be, an opinion of Hamilton, Brook, Smith & Reynolds, P.C. and Howrey and Simon,
patent counsel for the Company, substantially in the form of Exhibits C and D,
respectively, attached hereto.
(e) Opinion of Counsel for the Initial Purchasers. You shall have
received on the First Closing Date or on the Second Closing Date, as the case
may be, an opinion of Testa, Hurwitz & Thibeault, LLP, substantially in the form
of Exhibit E attached hereto. The Company shall have furnished to such counsel
such documents as they may have requested for the purpose of enabling them to
pass upon such matters.
(f) Accountants' Comfort Letter. You shall have received on the
First Closing Date or on the Second Closing Date, as the case may be, a letter
from Deloitte & Touche LLP, addressed to the Initial Purchasers, dated the First
Closing Date or the Second Closing Date, as the case may be, confirming that
they are independent certified public accountants with respect to the Company
under Rule 101 of the AICPA's Code of Professional Conduct and its
interpretations and rulings and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
four (4) business days prior to the First Closing Date or the Second Closing
Date, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the First Closing Date or the Second Closing Date, as the case may be; and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise from that set
forth in the Final Circular which, in your sole judgment, is material and
adverse and makes it impracticable or inadvisable to proceed with the sale of
the Firm Securities and the Option Securities as contemplated by the Final
Circular. The Original Letter from Deloitte & Touche LLP, shall be addressed to
or for the use of the Initial Purchasers in form and substance satisfactory to
the Initial Purchasers and shall (i) represent, to the extent true, that they
are independent certified public accountants with respect to the Company under
Rule 101 of the AICPA's Code of Professional Conduct and its interpretations and
rulings, (ii) set forth their opinion with respect to their examination of the
consolidated balance sheet of the Company as of March 31, 1999 and related
consolidated statements of operations, shareholders' equity, and cash flows for
the twelve (12) months ended March 31, 1999, (iii) state that Deloitte & Touche
LLP has performed the procedures set out in Statement on Auditing Standards No.
71 ("SAS 71") for a review of interim
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<PAGE> 19
financial information for each of the quarters in the three-quarter period ended
December 31, 1999 (the "Quarterly Financial Statements"), (iv) state that in the
course of such review, nothing came to their attention that leads them to
believe that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, and address other matters agreed upon by Deloitte & Touche LLP and
you.
(g) Officers' Certificate. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a certificate
of the Company, dated the First Closing Date or the Second Closing Date, as the
case may be, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First Closing Date
or the Second Closing Date, as the case may be, and the Company has complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the First Closing Date or the Second
Closing Date, as the case may be;
(ii) As of the date of this Agreement and at all times
subsequent thereto up to the delivery of such certificate, the Final Circular
did not and does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which made, not misleading, and, since the date of this
Agreement, there has occurred no event necessary to be set forth in an amended
or supplemented Final Circular in order to make any statements in such Final
Circular, in light of the circumstances under which made, not misleading, which
has not been so set forth; and
(iii) Subsequent to the respective dates as of which
information is given in the Final Circular, there has not been (a) any material
adverse change in the condition (financial or otherwise), earnings, business,
operations or business prospects of the Company and its subsidiaries considered
as one enterprise, (b) any transaction that is material to the Company and its
subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (c) any obligation, direct or contingent,
incurred by the Company or any of its subsidiaries that is material to the
Company and its subsidiaries considered as one enterprise, except obligations
incurred in the ordinary course of business, (d) any change in the capital stock
or outstanding indebtedness of the Company or any of its subsidiaries which is
material to the Company and its subsidiaries considered as one enterprise,
except for the issuance of the Securities pursuant hereto, (e) except for
dividends declared on the Preferred Stock, any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (f) any loss or damage (whether or not insured) to the property
of the Company or any of its subsidiaries which has been sustained or will have
been sustained which has a material adverse effect on the condition (financial
or otherwise), earnings, business, operations or business prospects of the
Company and its subsidiaries considered as one enterprise.
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<PAGE> 20
(h) Registration Rights Agreement and Indenture. The Registration
Rights Agreement and the Indenture shall have been executed and delivered by all
parties;
(i) Lock-up Agreement from Certain Stockholders. The Company
shall have obtained and delivered to you an agreement substantially in the form
of Exhibit A attached hereto from each executive officer and director of the
Company.
(j) Compliance with Indebtedness Covenants. You shall have
received on the First Closing Date and Second Closing Date, as the case may be,
a certificate of the Company, dated the Closing Date or Second Closing Date, as
the case may be, signed on behalf of the Company by either the Chief Executive
Officer and Chief Financial Officer of the Company, to the effect that, and you
shall be satisfied that:
(i) The only indenture, mortgage, deed of trust, loan
agreement, bond, debenture, note agreement or other evidence of indebtedness to
which the Company or any of its subsidiaries is a party or by which any of them
are bound is the following (true, correct and complete copies of which have been
delivered to counsel for the Initial Purchasers).
(A) Letter Agreement, dated September 27, 1996, by and among
Fleet National Bank, the Company, Alkermes Controlled Therapeutics, Inc. ("ACT
I") and Alkermes Controlled Therapeutics Inc. II ("ACT II"), and related
evidence of indebtedness, as amended by the First Loan Supplement and
Modification agreement dated June 2, 1997 and related agreements and evidence of
indebtedness, by the Second Loan Supplement and Modification Agreement dated
March 19, 1998, and related agreements and evidence of indebtedness, and by the
Third Loan Supplement and Modification Agreement dated September 24, 1998, and
related agreements and evidence of indebtedness; Security Agreement, dated as of
September 27, 1996, by and among the Company, ACT I, ACT II and Fleet National
Bank; Pledge Agreement, dated as of September 27, 1996, between the Company and
Fleet National Bank; and Mortgage and Security Agreement, dated as of September
27, 1996, between ACT II and Fleet National Bank;
(B) Indenture dated as of March 1, 1998, between the Company and
State Street Bank and Trust Company, as trustee with respect to the 6-1/2%
Convertible Subordinated Debentures of the Company; and
(C) Promissory Note dated October 8, 1998 in the principal amount
of $5,983,292 issued by ACT I and Schering Corporation.
(ii) As of the First Closing Date and any Second Closing
Date, as the case may be, the Company is not in breach of, or default under the
provisions of the agreements and instruments referred to in paragraph (i) above,
and the issuance and sale by the Company of the Firm Securities and Option
Securities would not result in a breach of, or constitute a default under, the
provisions of the agreements and instruments referred to in paragraph (i) above
including, without limitation, with respect to the financial covenants in such
agreements and instruments. The Company will attach as an exhibit to such
certificate the computations demonstrating the compliance of such financial
covenants. Such computations have been made in conformity with the provisions
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of such agreements and instruments, and the terms used in such agreements and
instruments, and the terms used in such computations have the meanings assigned
thereto in such agreements and instruments.
(iii) Attached as an exhibit to such certificate are
copies of any required waivers or amendments or consents in respect of the
agreements referred to above.
(iv) To such officers' knowledge (after reasonable
inquiry), as of the date of this Agreement, and as of the First Closing Date or
any Second Closing Date, as the case may be, no condition exists which, with the
giving of notice or passage of time, would constitute a default or breach
referred to in Paragraph (ii) above.
(k) Additional Documents. On or before each of the First Closing
Date and the Second Closing Date, as the case may be, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such information,
documents and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Securities as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Initial Purchasers by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Securities, at any time prior to
the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 5 (Payment of
Expenses), Section 6 (Reimbursement of Initial Purchasers' Expenses), Section 7
(Indemnification and Contribution) and Section 10 (Representations and
Indemnities to Survive Delivery) shall at all times be effective and shall
survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Firm Securities and the Option Securities (including all printing and engraving
costs), (ii) all fees and expenses of the registrar and transfer agent, (iii)
all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Securities to the Initial Purchasers, (iv) all fees and
expenses of the Company's counsel, independent public or certified public
accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Final Circular (including financial statements, exhibits, schedules,
consents and certificates of experts) and each Preliminary Circular, and all
amendments and supplements thereto, and this Agreement, the Indenture and the
Registration Rights Agreement (vi) all filing fees, attorneys' fees and expenses
incurred by the Company or the Initial Purchasers in connection with qualifying
(or obtaining exemptions from the qualification of) all or any part of the
Securities for offer and sale under the state securities or blue sky laws or the
provincial securities laws of Canada or any other country, and, if requested by
the Initial Purchasers, preparing and printing a "Blue Sky Survey", an
"International Blue Sky Survey" or other
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memorandum, and any supplements thereto, advising the Initial Purchasers of such
qualifications, registrations and exemptions, (vii) the fees and expenses of the
Trustee and Trustee's counsel in connection with the Indenture and the
Securities; (viii) the fees and expenses, if any, incurred in connection with
the admission of such Securities for trading in The Portal Market and for
clearance and settlement through DTC, if applicable, and listing of the
Underlying Securities on the Nasdaq National Market; and (ix) all costs and
expenses incident to the preparation and undertaking of "road show" preparations
to be made to prospective investors. Except as provided in this Section 5,
Section 6, and Section 7 hereof, the Initial Purchasers shall pay their own
expenses, including the fees and disbursements of their counsel.
SECTION 6. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If this
Agreement is terminated by the Initial Purchasers pursuant to Section 4 or
Section 9, or if the sale to the Initial Purchasers of the Securities on the
First Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Initial
Purchasers severally, upon demand for all out-of-pocket expenses that shall have
been reasonably incurred by the Initial Purchasers in connection with the
proposed purchase and the offering and sale of the Securities, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Initial Purchaser.
(i) The Company agrees to indemnify and hold harmless each
Initial Purchaser, its officers and employees, and each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act and the
Exchange Act against any loss, claim, damage, liability or expense, as incurred,
to which such Initial Purchaser or such controlling person may become subject,
under the Securities Act, the Exchange Act or other Federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim,
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damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in any Circular (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (ii) in whole or in
part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iii) in whole or in part upon any failure of the Company
to perform its obligations hereunder or under law; or (iv) any act or failure to
act or any alleged act or failure to act by any Initial Purchaser in connection
with, or relating in any manner to, the Securities or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any matter covered by
clause (i), (ii) or (iii) above, provided that the Company shall not be liable
under this clause (iv) to the extent that a court of competent jurisdiction
shall have determined by a final judgment that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Initial Purchaser through its bad
faith or willful misconduct; and to reimburse each Initial Purchaser and each
such controlling person for any and all expenses (including the reasonable fees
and disbursements of counsel chosen by FleetBoston Robertson Stephens Inc.) as
such expenses are reasonably incurred by such Initial Purchaser or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the Initial
Purchasers expressly for use in any Circular (or any amendment or supplement
thereto); and provided, further, that with respect to the Preliminary Circular,
the foregoing indemnity agreement shall not inure to the benefit of any Initial
Purchaser from whom the person asserting any loss, claim, damage, liability or
expense purchased Securities, or any person controlling such Initial Purchaser,
if copies of the Final Circular were timely delivered to the Initial Purchaser
pursuant to Section 2 and a copy of the Final Circular (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Initial Purchaser to such
person, at or prior to the written confirmation of the sale of the Securities to
such person, and if the Final Circular (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers.
Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers and each
person, if any, who controls the Company within the meaning of the Securities
Act and the Exchange Act, against any loss, claim, damage, liability or expense,
as incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act, or other
Federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Initial Purchaser, which consent shall not be
unreasonably withheld), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in any Circular (or any amendment or supplement thereto), or arises
out of or is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Circular (or any amendment or supplement thereto), in
reliance upon and in conformity with written information furnished to the
Company by the Initial Purchasers expressly for use therein; and to reimburse
the Company, or any such director, officer or controlling person for any legal
and other expense reasonably incurred by the Company, or any such director,
officer or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. The indemnity
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agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Initial Purchaser may otherwise have.
(c) Information Provided by the Initial Purchasers. The Company
hereby acknowledges that the only information that the Initial Purchasers have
furnished to the Company expressly for use in any Circular (or any amendment or
supplement thereto) are the statements set forth in the last sentence of the
last paragraph on the front cover page of the Circular, the table in the first
paragraph under the caption "Plan of Distribution" in the Circular, and the
third paragraph, the last two sentences of the eleventh paragraph and the
twelfth paragraph under the caption "Plan of Distribution" in the Circular; and
the Initial Purchasers confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (FleetBoston Robertson Stephens Inc. in the case of Section
7(b)), representing the indemnified parties who are parties to such action),
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of such action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying
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<PAGE> 25
party, in each of which cases the reasonable fees and expenses of counsel shall
be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party against any loss,
claim, damage, liability or expense by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have
been sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes (i) an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(f) Contribution. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other from the offering of the Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Initial Purchasers on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchaser on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bears to the total underwriting
discounts and commissions received by the Initial Purchasers, in each case as
set forth in the table on the cover page of the Final Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Initial Purchasers on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and Initial Purchasers agree that it would not be
just and equitable if contributions pursuant to this Section 7(f) were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7(f). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this
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<PAGE> 26
Section 7(f) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (f),
(i) no Initial Purchaser shall be required to contribute any amount in excess of
the underwriting discounts and commissions applicable to the Securities
purchased by such Initial Purchaser and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations in this
Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses,
claims, damages, liabilities or expenses for which an indemnified party is
entitled to indemnification or contribution under this Section 7 shall be paid
by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred, but in all cases, no later than
thirty (30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Company set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Initial
Purchaser or any person controlling any Initial Purchaser, the Company, its
directors or officers or any persons controlling the Company, (ii) acceptance of
any Securities and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Initial Purchaser, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement
hereby acknowledge that they are sophisticated business persons who were
represented by counsel during the negotiations regarding the provisions hereof
including, without limitation, the provisions of this Section 7, and are fully
informed regarding said provisions. They further acknowledge that the provisions
of this Section 7 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Circular.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Initial Purchasers shall fail or refuse to purchase
Securities that it or they have agreed to purchase hereunder on such date, and
the aggregate principal amount of Firm Securities, or Option Securities, as the
case may be, which such defaulting Initial Purchaser or Initial Purchasers
agreed but failed or refused to purchase does not exceed 10% of the aggregate
principal amount of the Securities to be purchased on such date, the other
Initial Purchasers shall be obligated, severally, in the proportions that the
principal amount of Firm Securities set forth opposite their respective names on
Schedule A bears to the principal amount of Firm Securities set forth opposite
the names of all such non-defaulting Initial Purchasers, or in such other
proportions as may be specified by the Initial Purchasers with the consent of
the non-defaulting Initial Purchasers, to purchase the Securities which such
defaulting
-26-
<PAGE> 27
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Initial Purchasers shall fail or refuse to
purchase Securities and the aggregate principal amount of Securities with
respect to which such default occurs exceeds 10% of the aggregate principal
amount of Securities to be purchased on such date, and arrangements satisfactory
to the Initial Purchasers and the Company for the purchase of such Securities
are not made within 48 hours after such default, this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the preceding
sentence of this Section 8, the Company shall not be liable to any Initial
Purchaser (except as provided in Sections 5, 6 and 7 hereof) and no Initial
Purchaser (other than an Initial Purchaser who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Initial Purchaser to be purchased hereunder, which Initial
Purchaser shall remain liable to the Company and the other Initial Purchasers
for damages, if any, resulting from such default) shall be liable to the Company
(except to the extent provided in Sections 5 and 7 hereof). In any such case
either the Initial Purchasers or the Company shall have the right to postpone
the First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Final Circular or any other documents or arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall be deemed
to include any person substituted for a defaulting Initial Purchaser under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Initial Purchaser from liability in respect of any default of such
Initial Purchaser under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Initial Purchasers by notice given
to the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of Federal, New York, Pennsylvania or California authorities;
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the Initial
Purchasers is material and adverse and makes it impracticable or inadvisable to
market the Securities in the manner and on the terms described in the Final
Circular or to enforce contracts for the sale of securities; (iv) in the
judgment of the Initial Purchasers there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Initial Purchasers may interfere materially with the conduct of
the business and operations of the Company regardless of whether or not such
loss shall have been insured. Any termination pursuant to this Section 9 shall
be without liability on the part of (a) the Company to any Initial Purchaser,
except that the Company shall be obligated to reimburse the expenses of the
Initial Purchasers and the Initial Purchasers pursuant to
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<PAGE> 28
Sections 5 and 6 hereof, (b) any Initial Purchaser to the Company, or (c) of any
party hereto to any other party except that the provisions of Section 7 shall at
all times be effective and shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Initial Purchasers
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Initial
Purchaser or the Company or any of its or their partners, officers or directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Securities sold hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:
FleetBoston Robertson Stephens Inc.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
Alkermes, Inc.
64 Sidney Street
Cambridge, MA 02139
Facsimile: (617) 494-9255
Attention: Chief Financial Officer
With a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attention: Morris Cheston, Jr.
Any party hereto may change the address for receipt of communications
by giving written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 8 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The
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<PAGE> 29
term "successors" shall not include any purchaser of the Securities as such from
any of the Initial Purchasers merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the federal
courts of the United States of America located in the City and County of San
Francisco or the courts of the State of California in each case located in the
City and County of San Francisco (collectively, the "Specified Courts"), and
each party irrevocably submits to the exclusive jurisdiction (except for
proceedings instituted in regard to the enforcement of a judgment of any such
court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of
such courts in any such suit, action or proceeding. Service of any process,
summons, notice or document by mail to such party's address set forth above
shall be effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally waive any
objection to the laying of venue of any suit, action or other proceeding in the
Specified Courts and irrevocably and unconditionally waive and agree not to
plead or claim in any such court that any such suit, action or other proceeding
brought in any such court has been brought in an inconvenient forum. Each party
not located in the United States irrevocably appoints CT Corporation System,
which currently maintains a San Francisco office at 49 Stevenson Street, San
Francisco, California 94105, United States of America, as its agent to receive
service of process or other legal summons for purposes of any such suit, action
or proceeding that may be instituted in any state or federal court in the City
and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related
Proceeding, each party irrevocably waives, to the fullest extent permitted by
applicable law, all immunity (whether on the basis of sovereignty or otherwise)
from jurisdiction, service of process, attachment (both before and after
judgment) and execution to which it might otherwise be entitled in the Specified
Courts, and with respect to any Related Judgment, each party waives any such
immunity in the Specified Courts or any other court of competent jurisdiction,
and will not raise or claim or cause to be pleaded any such immunity at or in
respect of any such Related Proceeding or Related Judgment, including, without
limitation, any immunity pursuant to the United States Foreign Sovereign
Immunities Act of 1976, as amended.
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<PAGE> 30
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
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<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
ALKERMES, INC.
By: /s/ James M. Frates
-----------------------------------------
Name: James M. Frates
Title: Vice President, Chief Financial
Officer and Treasurer
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Initial Purchasers as of the date first above written.
FLEETBOSTON ROBERTSON STEPHENS INC.
ADAMS, HARKNESS & HILL, INC.
ING BARINGS LLC
J.P. MORGAN SECURITIES INC.
PAINEWEBBER INCORPORATED
SG COWEN SECURITIES CORPORATION
U.S. BANCORP PIPER JAFFRAY INC.
BY: FLEETBOSTON ROBERTSON STEPHENS INC.
By: /s/ Brendon Dyson
-------------------------
Authorized Signatory
<PAGE> 32
SCHEDULE A
<TABLE>
<CAPTION>
Aggregate Principal Amount
of Firm Securities to be
Initial Purchasers Purchased
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
FleetBoston Robertson Stephens Inc. $128,000,000
Adams, Harkness & Hill, Inc....................................................... 12,000,000
ING Barings LLC................................................................... 12,000,000
J.P. Morgan Securities Inc........................................................ 12,000,000
PaineWebber Incorporated.......................................................... 12,000,000
SG Cowen Securities Corporation................................................... 12,000,000
U.S. Bancorp Piper Jaffray Inc.................................................... 12,000,000
------------------
Total......................................................................... $ 200,000,000
==================
</TABLE>
<PAGE> 1
EXHIBIT 4.8
3-3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated as of February 18, 2000
between
ALKERMES, INC.
as the Company,
and
FLEETBOSTON ROBERTSON STEPHENS INC.
ADAMS, HARKNESS & HILL, INC.
ING BARINGS LLC
J.P. MORGAN SECURITIES INC.
PAINEWEBBER INCORPORATED
SG COWEN SECURITIES CORPORATION
U.S. BANCORP PIPER JAFFRAY INC.
as Purchasers
<PAGE> 2
This Registration Rights Agreement is made and entered into as
of February 18, 2000 between Alkermes, Inc., a Pennsylvania corporation (the
"Company"), and FleetBoston Robertson Stephens Inc., Adams, Harkness & Hill,
Inc. ING Barings LLC, J.P. Morgan Securities Inc., PaineWebber Incorporated, SG
Cowen Securities Corporation and U.S. Bancorp Piper Jaffray Inc. (the
"Purchasers") who have purchased or have the right to purchase up to
$200,000,000 in aggregate principal amount of 3-3/4% Convertible Subordinated
Notes due 2007 (or up to $250,000,000 if the option set forth in Section 2(b) of
the Purchase Agreement (as defined below) is exercised in full by the
Purchasers) of the Company pursuant to the Purchase Agreement.
This Agreement is made pursuant to the Purchase Agreement, dated
February 15, 2000 among the Company and the Purchasers (the "Purchase
Agreement"). In order to induce the Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights provided
for in this Agreement to the Purchasers and their respective direct and indirect
transferees (i) for the benefit of the Purchasers, (ii) for the benefit of the
holders from time to time of the Notes (as such term is defined in Section 1
hereof) (including the Purchasers) and the holders from time to time of the
Common Stock (as such term is defined in Section 1 hereof) issuable or issued
upon conversion of the Notes and (iii) for the benefit of the securities
constituting the Transfer Restricted Securities (as such term is defined in
Section 1 hereof). The execution of this Agreement is a condition to the closing
of the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
Act: As defined in the last paragraph of this Section 1.
Advice: As defined in Section 2(d) hereof.
Affiliate: An affiliate of any specified person shall mean any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
Agreement: This Registration Rights Agreement, as the same may
be amended, supplemented or modified from time to time in accordance with the
terms hereof.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
<PAGE> 3
Closing Date: February 18, 2000.
Common Stock: Common Stock, $.01 par value per share, of the
Company and any other shares of common stock as may constitute "Common Stock"
for purposes of the Indenture, in each case, as issuable or issued upon
conversion of the Notes.
Company: Alkermes, Inc., a Pennsylvania corporation, and any
successor corporation thereto.
Company Indemnified Person: As defined in Section 6(c) hereof.
controlling person: As defined in Section 6(a) hereof.
Damages Payment Date: Each of the semi-annual interest payment
dates provided in the Indenture.
Effectiveness Period: As defined in Section 2(a) hereof.
Effectiveness Target Date: The 150th day following the Closing
Date.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
Filing Date: The 60th day after the Closing Date.
Holder: Each owner of any Transfer Restricted Securities.
Indemnified Person: As defined in Section 6(a) hereof.
Indemnified Party: As defined in Section 6(c) hereof.
Indemnifying Party: The Company, on one hand or any Holder (or
predecessor Holder), on the other hand, as applicable in accordance with Section
6 hereof.
Indenture: The Indenture, dated as of the date hereof, between
the Company and the Trustee, pursuant to which the Notes are being issued, as
the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
Liquidated Damages: As defined in Section 3(a) hereof.
Notes: The $200,000,000 aggregate principal amount of 3-3/4%
Convertible Subordinated Notes due 2007 of the Company being issued pursuant to
the Indenture (or $250,000,000 if the option set forth in Section 2(b) of the
Purchase Agreement is exercised in full by the Initial Purchasers).
Notice and Questionnaire: A written notice delivered to the
Company containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire
- 2 -
<PAGE> 4
attached as Annex A to the Offering Circular of the Company dated February 15,
2000 relating to the Notes.
Proceeding: An action, claim, suit or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
Prospectus: The prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the resale of any of the Transfer Restricted Securities covered by such
Registration Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all materials incorporated
by reference or deemed to be incorporated by reference, if any, in such
prospectus.
Purchase Agreement: As defined in the second paragraph hereof.
Purchasers: As defined in the first paragraph hereof.
Record Holder: (i) with respect to any Damages Payment Date
relating to any Note as to which any such Liquidated Damages have accrued, the
registered Holder of such Note on the record date with respect to the interest
payment date under the Indenture on which such Damages Payment Date shall occur
and (ii) with respect to any Damages Payment Date relating to any shares of
Common Stock as to which any such Liquidated Damages have accrued, the
registered Holder of such shares 15 days prior to the next succeeding Damages
Payment Date.
Registration Default: As defined in Section 3(a) hereof.
Registration Statement: Any registration statement of the
Company filed with the SEC pursuant to the Securities Act that covers the resale
of any of the Transfer Restricted Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
Requisite Information: As defined in Section 2(c) hereof.
Restricted Notes: Notes required pursuant to the Indenture to
bear the legend set forth in Section 2.5(d) of the Indenture.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such rule may be amended from time to time, or any successor
rule or regulation.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such rule may be amended from time to time, or any successor
rule or regulation.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such rule may be amended from time to time, or any successor
rule or regulation.
- 3 -
<PAGE> 5
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such rule may be amended from time to time, or any successor
rule or regulation.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration Statement: As defined in Section 2(a)
hereof.
Special Counsel: The special counsel to the Holders.
TIA: The Trust Indenture Act of 1939, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Transfer Restricted Securities: The Restricted Notes and the
shares of Common Stock into which such Restricted Notes are converted or
convertible (including any shares of Common Stock issued or issuable thereon
upon any stock split, stock combination, stock dividend or the like) upon
original issuance thereof, and at all times subsequent thereto, and associated
related rights, if any, until, in the case of any such Restricted Note or shares
of Common Stock (and associated rights) (i) the date on which the resale thereof
has been effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement relating thereto, (ii) the date on
which such security has been distributed to the public pursuant to Rule 144 or
is saleable pursuant to paragraph (k) of Rule 144 or (iii) the date on which
such security ceases to be outstanding, whichever date is earliest.
Trustee: The trustee under the Indenture.
underwritten registration or underwritten offering: A
registration in connection with which securities of the Company are sold to one
or more underwriters for reoffering to the public pursuant to an effective
Registration Statement.
References herein to the term "Holders of a majority in
aggregate principal amount of Transfer Restricted Securities" or words to a
similar effect shall mean, with respect to any request, notice, demand,
objection or other action by the Holders hereunder or pursuant hereto (each, an
"Act"), registered Holders of a number of shares of then-outstanding Common
Stock constituting Transfer Restricted Securities and an aggregate principal
amount of then outstanding Notes constituting Transfer Restricted Securities,
such that the sum of such shares of Common Stock and the shares of Common Stock
issuable upon conversion of such Notes constitutes in excess of 50% of the sum
of all of the then-outstanding shares of Common Stock constituting Transfer
Restricted Securities and the number of shares of Common Stock issuable upon
conversion of then-outstanding Notes constituting Transfer Restricted
Securities. For purposes of the preceding sentence, Transfer Restricted
Securities owned, directly or indirectly, by the Company or its Affiliates shall
be deemed not to be outstanding.
- 4 -
<PAGE> 6
2. Shelf Registration Statement.
(a) The Company agrees to file with the SEC as soon as
reasonably practicable after the Closing Date, but in no event later than the
Filing Date a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415, covering all of the Transfer Restricted Securities
or separate Registration Statements for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Notes constituting Transfer
Restricted Securities and all of the Common Stock constituting Transfer
Restricted Securities, respectively (such Registration Statement or Statements,
collectively, the "Shelf Registration Statement"). The Shelf Registration
Statement shall be on Form S-3 under the Securities Act or another appropriate
form selected by the Company permitting registration of such Transfer Restricted
Securities for resale by the Holders in the manner or manners reasonably
designated by Holders of a majority in aggregate principal amount of Transfer
Restricted Securities being sold (including, without limitation, up to two
underwritten offerings). The Company shall not permit any securities other than
the Transfer Restricted Securities to be included in the Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the Shelf
Registration Statement to be declared effective pursuant to the Securities Act
as soon as reasonably practicable following the filing thereof and to keep the
Shelf Registration Statement continuously effective under the Securities Act for
two years after the latest date of original issuance of any of the Notes
(subject to extension pursuant to Sections 2(d) hereof) (the "Effectiveness
Period"), or such shorter period ending when there cease to be any Transfer
Restricted Securities outstanding.
(b) Supplements and Amendments. The Company shall use its
reasonable best efforts to keep the Shelf Registration Statement continuously
effective by supplementing and amending the Shelf Registration Statement if
required by the rules, regulations or instructions applicable to the
registration form used for the Shelf Registration Statement, if required by the
Securities Act or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities or by any
underwriter of such Transfer Restricted Securities; provided, however, that the
Effectiveness Period shall be extended as provided in Section 2(d) hereof.
(c) Selling Securityholder Information. Each Holder of
Transfer Restricted Securities agrees that if such Holder wishes to sell
Transfer Restricted Securities pursuant to the Shelf Registration Statement and
related Prospectus, it will do so only in accordance with this Section 2. Each
Holder of Transfer Restricted Securities wishing to sell Transfer Restricted
Securities pursuant to the Shelf Registration Statement and related Prospectus
agrees to deliver a Notice and Questionnaire that includes such information
regarding the distribution of its Transfer Restricted Securities as is required
by law to be disclosed by the Holder in the Shelf Registration Statement (the
"Requisite Information") to the Company prior to any intended distribution of
Transfer Restricted Securities under the Shelf Registration Statement. From and
after the date the Shelf Registration Statement becomes effective, the Company
shall, as promptly as is practicable after the date a Notice and Questionnaire
is delivered, and in any event within five (5) Business Days after such date,
(i) if required by applicable law, file with the SEC a post-effective amendment
to the Shelf Registration Statement or prepare and, if required by applicable
law, file
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<PAGE> 7
a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that the Holder delivering such Notice and Questionnaire is named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Transfer Restricted Securities in accordance with
applicable law and, if the Company shall file a post-effective amendment to the
Shelf Registration Statement, use its reasonable best efforts to cause such
post-effective amendment to be declared effective under the Securities Act as
promptly as is practicable, but in any event by the date that is forty-five (45)
days after the date such post-effective amendment is required by this clause to
be filed; (ii) provide such Holder copies of any documents filed pursuant to
Section 2(c)(i); and (iii) notify such Holder as promptly as practicable after
the effectiveness under the Securities Act of any post-effective amendment filed
pursuant to Section 2(c)(i); provided, that if such Notice and Questionnaire is
delivered during a time that the use of the Prospectus is suspended pursuant to
Section 2(d), the Company shall so inform the Holder delivering such Notice and
Questionnaire and shall take the actions set forth in clauses (i), (ii) and
(iii) above upon such time the use of the Prospectus may be resumed, provided,
further, that if under applicable law the Company has more than one option as to
the type or manner of making any such filing, it will make the required filing
or filings in the manner or of a type reasonably expected to result in the
earliest availability of the Prospectus for effecting resales of the Holder's
Transfer Restricted Securities.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require, in the event that such reference to such
Holder by name or otherwise is not required by the Securities Act or any similar
Federal statute then in force, the deletion of the reference to such Holder in
such Registration Statement.
(d) Certain Notices; Suspension of Sales. Each Holder agrees
by acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Transfer Restricted Securities covered
by the Registration Statement and Prospectus (other than in transactions exempt
from the registration requirements under the Securities Act) until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Sections 4(c)(i) and 4(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Sections 4(c)(i) and 4(k) hereof or (y) the
Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
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<PAGE> 8
(e) Material Events; Suspension of Sales. Notwithstanding the
provisions contained in this Section 2, in the event that, in the judgment of
the Company's Board of Directors, it is advisable to suspend use of the
Prospectus due to pending corporate developments, public filings with the SEC or
similar events, the Company shall promptly deliver a written certificate to each
registered Holder, the Special Counsel and the managing underwriters, if any, to
the effect that the use of the Prospectus is to be suspended until the Company
shall deliver a written notice that the use of the Prospectus may be resumed.
Thereafter, the use of the Prospectus shall be suspended, and the Company shall
not be required to maintain the effectiveness of, or amend or update the Shelf
Registration Statement, or amend or supplement the Prospectus; provided,
however, that the Company shall only be permitted to suspend the use of the
Prospectus for a period not to exceed 30 days in any six-month period or two
periods not to exceed an aggregate of 60 days in any 12-month period. The
Company will use its best efforts to ensure that the use of the Prospectus may
be resumed as soon as, in the judgment of the Company's Board of Directors,
disclosure of the material relating to such pending development, filing or event
would not have a materially adverse effect on the Company. If the Company shall
give any such suspension notice pursuant to this Section 2(e), the Effectiveness
Period shall be extended by the number of days during such period from and
including the date of giving such notice to and including the date when each
Holder shall have received notice that use of the Prospectus may be resumed.
3. Liquidated Damages.
(a) The Company and the Purchasers agree that the Holders will
suffer damages if the Company fails to fulfill its obligations pursuant to
Section 2 hereof and that it would not be possible to ascertain the extent of
such damages. Accordingly, the Company hereby agrees to pay liquidated damages
("Liquidated Damages") under the circumstances and to the extent set forth
below:
(i) to each Holder if the Shelf Registration
Statement has not been filed with the SEC on or prior to the
Filing Date; or
(ii) to each Holder if each Shelf Registration
Statement is not declared effective by the SEC on or prior to
the applicable Effectiveness Target Date;
(iii) to each Holder if the Shelf Registration
Statement ceases to be effective or usable at any time during
the Effectiveness Period (without being succeeded on the same
day immediately by a post-effective amendment or supplement to
the Shelf Registration Statement that cures such failure and
that is itself, in the case of post-effective amendment,
immediately declared effective) for a period of time which
shall exceed 90 days in the aggregate in any period of 365
consecutive days; or
(iv) to the particular Holder affected by the
Company's failure to perform its obligations set forth in
Section 2(c) within the time period required therein;
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<PAGE> 9
(any of the foregoing, a "Registration Default"); provided that the fact that a
Shelf Registration Statement is not usable by a particular Holder at any given
time solely as a result of the failure of such Holder to provide Requisite
Information with respect to it shall not be relevant for purposes of clause
(iii) above unless such Holder shall have provided such information to the
Company and the Company shall have failed to file an appropriate Prospectus
supplement or post-effective amendment to the Shelf Registration Statement. In
the event of any such Registration Default, the Company shall accrue Liquidated
Damages to each applicable Holder during the first 90-day period immediately in
an amount equal to $.05 per week per $1,000 principal amount of Notes held by
such Holder and, if applicable, on an equivalent basis per share (subject to
adjustment in the event of any stock split, stock combination, stock dividends
and the like) of Common Stock constituting Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The weekly rate at which such Liquidated Damages accrue shall
increase by an additional $.05 per $1,000 principal amount of Notes and, if
applicable, an equivalent amount per week per share (subject to adjustment as
set forth above) of Common Stock constituting Transfer Restricted Securities for
each subsequent continuing 90-day period following the occurrence of such
Registration Default until all Registration Defaults have been cured; provided,
however, that Liquidated Damages shall not at any time exceed $.25 per week per
$1,000 principal amount of Notes or, as applicable, an equivalent amount per
week per share (subject to adjustment as set forth above) of Common Stock
constituting Transfer Restricted Securities. In no event shall the Company be
required to pay Liquidated Damages in excess of the applicable maximum weekly
amount, regardless of whether one or multiple Registration Defaults shall exist.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages shall cease (without in any way limiting the effect of any subsequent
Registration Default). A Registration Default under clause (i) above shall be
cured on the date that the applicable Shelf Registration Statement is filed with
the SEC; a Registration Default under clause (ii) above shall be cured on the
date that the applicable Shelf Registration Statement is declared effective by
the SEC; a Registration Default under clause (iii) above shall be cured on the
date the applicable Shelf Registration Statement is declared effective or
otherwise usable; and a Registration Default under clause (iv) above shall be
cured on the date the applicable prospectus supplement to the Shelf Registration
Statement is filed or the post-effective amendment with respect to such Shelf
Registration Statement is declared effective.
(b) The Company shall notify the Trustee within one Business
Day after each and every date on which a Registration Default occurs. Liquidated
Damages shall be paid by the Company to the Record Holders on each Damages
Payment Date in the same manner as interest is paid under the Indenture, in the
case of the Notes, and by mailing checks to their registered addresses in the
register of the Company for the Common Stock, in the case of shares of Common
Stock; provided, however, that any Liquidated Damages accrued with respect to
any Note or portion thereof called for redemption on a redemption date,
repurchased in connection with a Repurchase Event (as defined in the Indenture)
on a repurchase date, or converted into shares of Common Stock on a conversion
date prior to the Damages Payment Date, shall, in any such event, be paid
instead to the Holder who submitted such Note or portion thereof for redemption,
repurchase or conversion on the applicable redemption date, repurchase date or
conversion date, as the case may be, on such date (promptly following the
conversion date, in the case of conversion of a Note).
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<PAGE> 10
(c) All of the Company's obligations set forth in this Section
3 which are unsatisfied to any extent with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security have been satisfied in full (notwithstanding the earlier termination of
this Agreement).
(d) Any payments due and payable pursuant to this Section 3
with respect to any Notes shall be subject to the provisions of Article IV of
the Indenture as if such payments were additional interest on the Notes.
(e) The parties hereto agree that the Liquidated Damages
provided for in this Section 3 constitute a reasonable estimate of the damages
that may be incurred by holders of record of Transfer Restricted Securities by
reason of the failure of the Shelf Registration Statement to be filed or
declared effective or unavailable (absolutely or as a practical matter) for
effecting resales of Transfer Restricted Securities in accordance with the
provisions hereof. Notwithstanding the foregoing, the parties agree that the
sole contractual damages payable for a violation of the terms of this Agreement
with respect to which Liquidated Damages are expressly provided shall be such
Liquidated Damages. Nothing in this Section 3(e), however, shall preclude a
holder of Transfer Restricted Securities from pursuing or obtaining specific
performance or other equitable relief with respect to the Company's failure to
pay Liquidated Damages pursuant to this Agreement.
4. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form selected by the Company to permit the resale of Transfer
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
reasonably possible:
(a) No fewer than five Business Days prior to the initial
filing of a Registration Statement or Prospectus and no fewer than two Business
Days prior to the filing of any amendment or supplement thereto, furnish to the
registered Holders (determined as of the most recent reasonably practicable date
which shall not be more than two Business Days prior to the date such document
is personally delivered, delivered to a next-day courier, deposited in the mail
or telecopied, as the case may be), Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed
(excluding, unless requested, those incorporated or deemed to be incorporated by
reference and then only to the Holder who so requested) and cause the officers
and directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such inquiries as shall be
necessary in connection with such Registration Statement, in the opinion of
Special Counsel and counsel to such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file any such Registration Statement or related Prospectus or any amendments or
supplements thereto to which the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities, Special Counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis;
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<PAGE> 11
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable time
period set forth in Section 2(a) hereof in case of the Shelf Registration
Statement and in case of any underwritten offering the period of distribution of
Transfer Restricted Securities covered by such Registration Statement; cause the
related Prospectus to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method or methods
of disposition by the Holder set forth in such Registration Statement as so
amended or in such Prospectus as so supplemented (including, without limitation,
the filing of any Prospectus supplement pursuant to Rule 424 in order to add or
change any selling security holder information (including any such supplements
or amendments pursuant to Section 2(c) hereof, provided such Holder to which
such change applies complies with the Requisite Information requirements of
Section 2(c) hereof));
(c) Notify the registered (as of the most recent reasonably
practicable date which shall not be more than two Business Days prior to the
date such notice is personally delivered, delivered to a next-day courier,
deposited in the mail or telecopied, as the case may be) Holders, Special
Counsel and the managing underwriters, if any, promptly (and in the case of an
event specified by clause (i)(A) of this paragraph in no event fewer than two
Business Days prior to such filing), and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and, (B) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request of the SEC or any other Federal
or state governmental authority for amendments or supplements to such
Registration Statement or related Prospectus or for additional information
related thereto, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop order, order
or injunction suspending or enjoining the use or the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) if at any time any of the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 4(m) hereof are not true and correct in all material respects during
the effectiveness of such agreement, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Transfer Restricted Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (vi) of the existence of any fact and the happening of any event
that makes any statement made in such Registration Statement or related
Prospectus untrue in any material respect, or that requires the making of any
changes in such Registration Statement or Prospectus so that in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and that, in the case of
the Prospectus, such Prospectus will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
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<PAGE> 12
(d) Use its reasonable best efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of any stop order or order enjoining or
suspending the use or effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption from qualification) of any
of the Transfer Restricted Securities for sale in any jurisdiction, at the
earliest practicable moment;
(e) If requested by the Special Counsel, the managing
underwriters, if any, or the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities being sold in connection with such
offering, (i) promptly include in a Prospectus supplement or post-effective
amendment such information as the Special Counsel, the managing underwriters, if
any, and such Holders agree should, in their reasonable judgment, be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as reasonably practicable after the
Company has received notification of the matters to be included in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 4(e)
that would, in the opinion of counsel for the Company, violate applicable law or
which is not reasonably required to comply with applicable securities laws;
(f) Furnish to each Holder who so requests, Special Counsel
and each managing underwriter, if any, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements (but excluding schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits, unless
requested in writing by such Holder, Special Counsel or managing underwriter);
(g) Deliver to each Holder, the Special Counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of Prospectus) and each amendment or
supplement thereto as such persons may reasonably request; and, unless the
Company shall have given notice to such Holder pursuant to Section 4(c), the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities and the underwriters, if any, in connection with the offering and
sale of the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto, provided, however, that no Holder shall be
entitled to use the Prospectus unless and until such Holder shall have furnished
to the Company any and all Requisite Information pursuant to Section 2(c)
hereof;
(h) Use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Transfer Restricted Securities to be sold or
tendered for, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Transfer Restricted Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions or such
other applicable governmental agencies or authorities within the United States
as any Holder or underwriter reasonably requests in writing, keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary legally to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that
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<PAGE> 13
the Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or subject the Company to any tax in any such jurisdiction
where it is not then so subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders and the managing
underwriters, if any, to (A) facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends, for the Notes shall bear a
CUSIP number different from the CUSIP number for the Transfer Restricted
Securities and for any Transfer Restricted Securities shall be in a form
eligible for deposit with The Depository Trust Company and (B) enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may reasonably
request at least two Business Days prior to any sale of Transfer Restricted
Securities;
(j) [Intentionally Omitted.]
(k) Upon the occurrence of any event contemplated by Section
4(c)(vi) hereof, as promptly as reasonably practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(l) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, to provide a CUSIP
number for the Transfer Restricted Securities to be sold pursuant to the
Registration Statement;
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as are customary in underwritten
offerings) reasonably satisfactory to the Company and take all such other
reasonable actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in order to
expedite or facilitate the sale of such Transfer Restricted Securities;
provided, however, that the Company is required to facilitate no more than two
underwritten offerings. In such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the Holders of
such Transfer Restricted Securities and the underwriters, if any, with respect
to the business of the Company and its subsidiaries (including with respect to
businesses or assets acquired or to be acquired by any of them), and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and
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<PAGE> 14
reasonably acceptable to the Company, and confirm the same if and when
requested; (ii) seek to obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and Special
Counsel to the Holders of the Transfer Restricted Securities being sold,
addressed to each selling Holder of Transfer Restricted Securities and each of
the underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings (including any such matters as may be
reasonably requested by such Special Counsel and underwriters); (iii) use all
reasonable efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data is, or is required to be, included in
the Registration Statement), addressed (where reasonably possible) to each
selling Holder of Transfer Restricted Securities and each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders of Transfer Restricted Securities and the underwriters, if any,
than those set forth in Section 6 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities covered by such Registration Statement, the
managing underwriters and to the Company); and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of majority in
aggregate principal amount of the Transfer Restricted Securities being sold,
their Special Counsel or the managing underwriters, if any, to evidence the
continued validity of the representations and warranties made pursuant to clause
(i) of this Section 4(m) and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company;
(n) Make available for inspection by a representative of the
Holders of Transfer Restricted Securities being sold, any underwriter
participating in any such disposition of Transfer Restricted Securities, if any,
and any attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries as they may reasonably request,
and cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement, provided, however, that such
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery or inspection (as the case may be) of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to Federal securities laws in connection with the filing of any Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by
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<PAGE> 15
any such person or (iv) such information becomes available to any such person
from a source other than the Company and such source is not bound by a
confidentiality agreement.
(o) Use its reasonable best efforts to cause the Indenture to
be qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Transfer Restricted Securities; and in
connection therewith, cooperate with the Trustee and the Holders of Notes
constituting Transfer Restricted Securities to effect such changes to the
Indenture, if any, as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts to
cause the Trustee to execute, all customary documents as may be required to
effect such changes, and all other forms and documents (including Form T-1)
required to be filed with the SEC to enable the Indenture to be so qualified
under the TIA in a timely manner.
(p) Comply with applicable rules and regulations of the SEC
and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act or Rule 158 of
the Securities Act (or any similar rule promulgated under the Securities Act),
no later than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing at
the end of any fiscal quarter in which Transfer Restricted Securities are sold
to underwriters in a firm commitment or best efforts underwritten offering and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158 of the Securities Act; and
(q) (i) list all shares of Common Stock covered by such
Registration Statement on any securities exchange on which the Common Stock is
then listed or (ii) if required by the applicable rules, authorize for quotation
on the National Association of Securities Dealers Automated Quotation System
("Nasdaq") or the National Market of Nasdaq all Common Stock covered by such
Registration Statement if the Common Stock is then so authorized for quotation.
5. Registration Expenses.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Registration Statement is filed or becomes effective and whether or not
any securities are offered or sold pursuant to any Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filings fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation and in addition
to that provided for in (b) below, reasonable fees and disbursements of counsel
for the underwriters or the Special Counsel in connection with Blue Sky
qualifications of the Transfer Restricted Securities and determination of the
eligibility of the Transfer Restricted Securities for investment under the laws
of such jurisdictions as the managing underwriters, if any, or Holders of a
majority in aggregate principal amount of
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<PAGE> 16
Transfer Restricted Securities, may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for Transfer
Restricted Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses if the printing of Prospectuses is required
by the managing underwriters, if any, or by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included),
(iii) messenger, telephone and delivery expenses of the Company, (iv) reasonable
fees and disbursements of counsel for the Company and the Special Counsel (plus
any local counsel deemed appropriate by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities) in accordance with the
provisions of Section 5(b) hereof, (v) fees and disbursements of all independent
certified public accountants referred to in Section 4(m)(iii) (including,
without limitation, the expenses of any special audit and "comfort" letters
required by or incident to such performance), (vi) Securities Act liability
insurance, if the Company so desires such insurance, and (vii) fees and expenses
of all other persons retained by the Company. In addition, the Company shall pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of an annual audit and the fees and expenses incurred in connection with
the listing of the securities to be registered on any securities exchange or the
Nasdaq National Market. Notwithstanding anything in this Agreement to the
contrary, each Holder shall pay all underwriting discounts and brokerage
commissions with respect to any Transfer Restricted Securities sold by it.
(b) In connection with any registration hereunder, the Company
shall reimburse the Holders of the Transfer Restricted Securities being
registered or tendered for in such registration for the reasonable fees and
disbursements of not more than one firm of attorneys representing the selling
Holders (in addition to any local counsel), which firm shall initially be chosen
by the Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities. Testa, Hurwitz & Thibeault, LLP shall be Special Counsel
for all purposes hereof, but which may, with the written consent of the
Purchasers (which shall not be unreasonably withheld), be another nationally
recognized law firm experienced in securities law matters designated by the
Company unless and until another Special Counsel shall have been selected by a
majority in aggregate principal amount of the Transfer Restricted Securities and
notice hereof shall have been given to the Company.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) the
Purchasers, (ii) each Holder, (iii) each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) any of the foregoing (any of the persons referred to in this clause (iii)
being hereinafter referred to as a "controlling person"), and (iv) the
respective officers, directors, partners, employees, representatives and agents
of the Purchasers, the Holders (including predecessor Holders), or any
controlling person (any person referred to in clause (i), (ii), (iii) or (iv)
may hereinafter be referred to as an "Indemnified Person"), from and against any
and all losses, claims, damages, liabilities, expenses and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact
- 15 -
<PAGE> 17
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading, except insofar as such losses,
claims, damages, liabilities, expenses or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished to the Company by or on
behalf of such Indemnified Person expressly for use therein; provided, however,
that the foregoing indemnity with respect to any preliminary Prospectus shall
not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities, expenses and judgments
purchased securities if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary Prospectus is eliminated or
remedied in the Prospectus and a copy of the Prospectus shall not have been
furnished to such person in a timely manner due to the wrongful action or
wrongful inaction of such Indemnified Person, whether as a result of negligence
or otherwise.
(b) In case any action shall be brought against any
Indemnified Person, based upon any Registration Statement or any such Prospectus
or any amendment or supplement thereto and with respect to which indemnity may
be sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) such Indemnified
Person or Persons shall have been advised by counsel that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such Indemnified
Person or Persons different from or in addition to those available to the
indemnifying party or parties (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified
Person), it being understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all such Indemnified
Persons, which firm shall be designated in writing by such Indemnified Persons,
and that all such fees and expenses shall be reimbursed as they are incurred.
The Company shall not be liable for any settlement of any such action effected
without its written consent but if settled with the written consent of the
Company, the Company agrees to indemnify and hold harmless, in accordance with
this Section 6, any Indemnified Person from and against any loss or liability by
reason of such settlement. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Party is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such proceeding.
- 16 -
<PAGE> 18
(c) In connection with any Registration Statement pursuant to
which any Holder (or predecessor Holder) sold or offered for resale Transfer
Restricted Securities, such Holder (or predecessor Holder) agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors, its
officers, employees, representatives, agents and any person controlling the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act (any such person referred to as a "Company Indemnified Person"
and collectively with the Indemnified Persons, any such person referred to as an
"Indemnified Party"), to the same extent as the foregoing indemnity from the
Company to each Indemnified Person but only with reference to information
relating to such Indemnified Person furnished by or on behalf of such
Indemnified Person expressly for use in such Registration Statement. In case any
action shall be brought against any Company Indemnified Person, based on such
Registration Statement and in respect of which indemnity may be sought against
any Indemnifying Party, the Indemnifying Party shall have the rights and duties
given to the Company (except that if the Company shall have assumed the defense
thereof, such Indemnifying Party shall not be required to do so, but may employ
separate counsel therein and participate in defense thereof but the fees and
expenses of such counsel shall be at the expense of such Indemnifying Party),
and the Company Indemnified Person shall have the rights and duties given to the
Indemnified Person by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an Indemnified Party in respect of any losses, claims, damages,
liabilities, expenses or judgments referred to therein, then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities, expenses and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and each Indemnified Person on the other hand pursuant to the Purchase
Agreement or from the offering for resale of the Transfer Restricted Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and each such Indemnified Person in connection with the statements
or omissions which resulted in such losses, claims, damages, liabilities,
expenses or judgments, as well as any other relevant equitable considerations.
The relative fault of the Company and each such Indemnified Person shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or such Indemnified Person and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Holders and the Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 6(d)
were determined by pro rata allocation (even if the Indemnified Person were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages, liabilities, expenses or
judgments referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection
- 17 -
<PAGE> 19
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6, no Indemnified Person shall be required to
contribute any amount in excess of the amount by which the total net profit
received by it in connection with the sale of the Transfer Restricted Securities
pursuant to this Agreement exceeds the amount of any damages which such
Indemnified Person has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Indemnified Persons'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective amount of Transfer Restricted Securities included
in and sold pursuant to any such Registration Statement by each Indemnified
Person and not joint.
7. Rules 144 and 144A.
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time it is not required to file such reports but in the past had been required
to or did file such reports, it will, upon the request of any Holder, make
available other information as required by, and so long as necessary to permit
sales of, its Transfer Restricted Securities pursuant to Rule 144 and Rule 144A.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
8. Underwritten Registrations.
If any of the Transfer Restricted Securities covered by the
Shelf Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be investment bankers of recognized national
standing selected by the Holders of a majority in aggregate principal amount of
such the Notes (or the proportional amount of Common Stock held as Transfer
Restricted Securities) included in such offering, subject to the consent of the
Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities underwriting agreements, lock-up agreements and other
documents reasonably required under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of their respective obligations under this Agreement, each Holder
or the Company, in addition to being entitled to exercise all rights granted by
law, including, without limitation, recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not be adequate compensation
- 18 -
<PAGE> 20
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, they shall waive the defense
that a remedy at law would be adequate. This Section 9(a) shall not apply to
Section 3.
(b) No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing until the
date at which the Securities (as defined in the Purchase Agreement) cease to be
Transfer Restricted Securities, without the written consent of the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities,
the Company shall not grant to any person the right to request it to register
any of its securities under the Securities Act unless the rights so granted are
subject in all respect to the prior rights of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) No Adverse Action Affecting the Transfer Restricted
Securities. The Company will not take any action with respect to the Transfer
Restricted Securities which would adversely affect the ability of any of the
Holders to include such Transfer Restricted Securities in a registration
undertaken pursuant to this Agreement.
(d) No Piggyback on Registrations. After the date hereof, the
Company shall not grant to any of its security holders (other than the Holders
in such capacity) the right to include any of its securities in the Shelf
Registration Statement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof,
may not be given, without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities; provided,
however, that, for the purposes of this Agreement, Transfer Restricted
Securities that are owned, directly or indirectly, by either the Company or an
Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders whose Transfer
Restricted Securities are being sold pursuant to an underwritten offering and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold by such Holders pursuant to such an
underwritten offering; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
- 19 -
<PAGE> 21
(f) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next day air courier,
certified first-class mail, return receipt requested or telecopy; provided a
copy of any such telecopy is immediately followed up by next day courier:
(i) if to a Holder, to the address of such
Holder as it appears in the Note or Common
Stock register of the Company, as
applicable;
(ii) if to the Company, to:
Alkermes, Inc.
64 Sidney Street
Cambridge, MA 02139
Attn: Chief Financial Officer
Telecopy No.: (617) 494-9255
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Attn: Morris Cheston, Jr., Esq.
Telecopy No.: (215) 864-8999
(iii) if to the Special Counsel, to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attn: Mitchell S. Bloom, Esq.
Telecopy No.: (617) 248-7100
or such other Special Counsel at such other address and telecopy number as a
majority in aggregate principal amount of the Transfer Restricted Securities
shall have given notice to the Company as contemplated by Section 5(b) hereof.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given, when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier, five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied; provided a copy of any such telecopy is
immediately followed up by next day courier.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each existing and future Holder.
The Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, other than by operation of law pursuant to a
merger
- 20 -
<PAGE> 22
or consolidation to which the Company is a party. In the event the Notes
constituting Transfer Restricted Securities become convertible into common stock
of another person pursuant to Section 15.6 of the Indenture, the Company shall
cause such person to assume the Company's obligations hereunder.
(h) Counterparts. This Agreement may be executed in any number
of counterparts by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(j) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(l) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover its reasonable attorneys' fees in addition to any
other available remedy.
- 21 -
<PAGE> 23
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
ALKERMES, INC.
By: /s/ James M. Frates
--------------------------------------------
Name: James M. Frates
Title: Vice President, Chief Financial
Officer and Treasurer
The foregoing Registration Rights Agreement
is hereby confirmed and agreed to as
of the date first written above:
FLEETBOSTON ROBERTSON STEPHENS INC.
ADAMS, HARKNESS & HILL, INC.
ING BARINGS LLC
J.P. MORGAN SECURITIES INC.
PAINEWEBBER INCORPORATED
SG COWEN SECURITIES CORPORATION
U.S. BANCORP PIPER JAFFRAY INC.
By: FLEETBOSTON ROBERTSON STEPHENS INC.
By: /s/ Brendan Dyson
---------------------------------------
Authorized Signatory
<PAGE> 1
EXHIBIT 5
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
February 29, 2000
Alkermes, Inc.
64 Sidney Street
Cambridge, Massachusetts 02139
Re: Registration Statement on Form S-3 for Alkermes, Inc.
Ladies and Gentlemen:
We have acted as counsel to Alkermes, Inc., a Pennsylvania corporation
(the "Company"), and are rendering this opinion in connection with the filing of
a Registration Statement on Form S-3 (the "Registration Statement") by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to the registration by the Company of (i)
$200,000,000 principal amount of its 3-3/4% Convertible Subordinated Notes due
2007 (the "Firm Notes") and $50,000,000 principal amount of its 3 3/4%
Convertible Subordinated Notes due 2007 that the initial purchasers have an
option to purchase under a Purchase Agreement dated February 15, 2000 between
the Company and the Initial Purchasers described therein (the "Option Notes"
and collectively with the Firm Notes, the "Notes") and (ii) 1,845,018 shares of
the Company's common stock, par value $.01 share (the "Common Stock"), issuable
upon conversion of the Notes (the "Conversion Shares"), all of which are to be
sold by certain holders of the Notes or the Conversion Shares as described in
the Registration Statement (the "Selling Securityholders"). The Firm Notes were,
and the Option Notes may be, issued under an Indenture dated as of February 18,
2000 (the "Indenture") by and between the Company and State Street Bank and
Trust Company, as Trustee (the "Trustee").
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of (i) the Registration Statement and all exhibits thereto,
(ii) the Second Amended and Restated Articles of Incorporation, as amended, of
the Company (the "Articles"), (iii) the Purchase Agreement described above (iv)
the Indenture, and (v) the form of the Notes. We have also examined such
corporate records and other agreements, documents and instruments, and such
certificates or comparable documents of public officials and officers and
representatives of the Company, and have made such inquiries of such officers
and representatives and have considered such matters of law as we have deemed
appropriate as the basis for the opinions hereinafter set forth, including the
Company's Amended and Restated By-Laws, certain resolutions adopted by the Board
of Directors of the Company relating to the issuance of the Notes and the
Conversion Shares and statements from certain officers of the Company. In
delivering this opinion, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to originals of all documents submitted to us
as certified, photostatic or conformed copies, the authenticity of originals of
all such latter documents, and the accuracy and completeness of all records,
information and statements submitted to us by officers and representatives of
the Company. In making our examination of documents executed by parties
<PAGE> 2
Alkermes, Inc.
February 29, 2000
Page Two
other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization of all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof with respect to such parties.
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, we are of the opinion that:
1. The Firm Notes are legally issued and binding obligations of the
Company. The Option Notes when issued, executed and delivered in accordance with
the terms of the Indenture, and when authenticated and delivered by the Trustee
in accordance with the Indenture, and assuming no change in the law from the
date of this opinion, will be legally issued and binding obligations of the
Company.
2. The Conversion Shares have been duly authorized by the Company and,
when issued and delivered in accordance with the terms of the Indenture, will be
validly issued, fully paid and nonassessable.
We express no opinion as to the law of any jurisdictions other than
the law of the Commonwealth of Pennsylvania and the State of New York.
We hereby consent to the sole use of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus included therein. This opinion is not to be used,
circulated, quoted, referred to or relied upon by any other person or for any
other purpose without our prior written consent.
Very truly yours,
/s/ Ballard Spahr Andrews
& Ingersoll, LLP
<PAGE> 1
EXHIBIT 12
ALKERMES, INC.
COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------------
1995 1996 1997 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed charges and preferred stock dividends:
Interest expense $ 608 $ 1,044 $ 1,381 $ 1,629
Estimated interest portion of rent expense* 777 732 1,003 1,085
Preferred stock dividends --- --- --- ---
--------------------------------------------------------------------
Total fixed charges and preferred stock dividends $ 1,385 $ 1,776 $ 2,384 $ 2,714
====================================================================
Net loss $ (11,904) $ (13,747) $ (18,798) $ (12,582)
Add: fixed charges and preferred stock dividends 1,385 1,776 2,384 2,714
--------------------------------------------------------------------
Deficiency of earnings to cover fixed charges
and preferred stock dividends $ (10,519) $ (11,971) $ (16,414) $ (9,868)
====================================================================
Ratio of earnings to fixed charges and preferred
stock dividends (1) --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31, Nine
-------------------- Months Ended
1999 December 31, 1999
---------------------------------
<S> <C> <C>
Fixed charges and preferred stock dividends:
Interest expense $ 2,298 $ 2,188
Estimated interest portion of rent expense* 1,271 1,157
Preferred stock dividends 7,454 6,846
---------------------------------
Total fixed charges and preferred stock dividends $ 11,023 $ 10,191
=================================
Net loss $ (41,057) $ (39,920)
Add: fixed charges and preferred stock dividends 11,023 10,191
---------------------------------
Deficiency of earnings to cover fixed charges
and preferred stock dividends $ (30,034) $ (29,729)
=================================
Ratio of earnings to fixed charges and preferred
stock dividends (1) --- ---
</TABLE>
* This amount is the portion of rental expense under operating leases which
management of the Company believes to approximate the interest factor
(approximately one-third of rental expenses).
(1) For the fiscal years ended March 31, 1995, 1996, 1997, 1998 and 1999 and for
the nine months ended December 31, 1999, earnings were insufficient to cover
fixed charges. For this reason, no ratios are provided.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Alkermes, Inc. on Form S-3 of our report dated May 21, 1999, appearing in the
Annual Report on Form 10-K of Alkermes, Inc., for the year ended March 31, 1999,
and to the reference to us under the heading "Experts" in the prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 29, 2000
<PAGE> 1
EXHIBIT 25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
[_] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
STATE STREET BANK AND TRUST COMPANY
------------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Massachusetts 04-1867445
---------------------------------- ----------------------------------
(State of incorporation if (I.R.S. Employer
not a national bank Identification No.)
</TABLE>
225 Franklin Street, Boston, Massachusetts 02110
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Maureen Bateman, Corporate Secretary,
225 Franklin Street, Boston, Massachusetts 02110
(617) 664-3253
------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
ALKERMES, INC.
------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Pennsylvania 23-2472830
---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
64 Sidney Street, Cambridge, Massachusetts 02139
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
3-3/4% Convertible Subordinated Notes due 2007
------------------------------------------------------------------------
(Title of the indenture securities)
<PAGE> 2
Item l. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
Department of Banking and Insurance of
The Commonwealth of Massachusetts
100 Cambridge Street
Boston, Massachusetts
Board of Governors of the Federal Reserve System
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee or its parent, State Street
Corporation.
Item 16. List of exhibits. List below all exhibits filed as a part of this
statement of eligibility and qualification.
l. A copy of the Articles of Association of the trustee as now
in effect.
A copy of the Articles of Association of the trustee, as
now in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse
Shoe, Inc. (File No. 22-17940) and is incorporated herein
by reference thereto.
2. A copy of the Certificate of Authority of the trustee to do
Business.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities
- 2 -
<PAGE> 3
and Exchange Commission as Exhibit 2 to Amendment No. 1 to
the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
3. A copy of the Certification of Fiduciary Powers of the
Trustee.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A copy of the By-laws of the trustee as now in effect.
A copy of the By-Laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with Registration Statement of
Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
5. A consent of the trustee required by Section 32l(b) of the
Act is annexed hereto as Exhibit 5 and made a part hereof.
6. A copy of the latest Consolidated Reports of Condition of
the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 6 and made a part hereof.
- 3 -
<PAGE> 4
NOTES
Inasmuch as this Form T-l is filed prior to the ascertainment
by the trustee of all facts on which to base its answer to Item 2, the answer to
said Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-l.
- 4 -
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, State Street Bank and Trust Company, a Massachusetts trust
company, has duly caused this statement of eligibility and qualification to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Boston, and State of Massachusetts, on the 29th day of February, 2000.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Paul G. Grenier
----------------------------------
Name: Paul G. Grenier
Title: Vice President
- 5 -
<PAGE> 6
EXHIBIT 5
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture entered into among SCG
Holding Corporation, Semiconductor Components Industries, LLC and State Street
Bank and Trust Company, Trustee, does hereby consent that, pursuant to Section
321(b) of the Trust Indenture Act of 1939, reports of examinations with respect
to the undersigned by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST
COMPANY,
Trustee
By /s/ Paul G. Grenier
------------------------------
Name: Paul G. Grenier
Title: Vice President
Dated: February 29, 2000
<PAGE> 7
EXHIBIT 6
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business SEPTEMBER 30, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............................1,510,845
Interest-bearing balances ....................................................14,076,224
Securities ............................................................................14,318,348
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ...........................................8,365,790
Loans and lease financing receivables:
Loans and leases, net of unearned income ...7,916,057
Allowance for loan and lease losses ...........92,091
Allocated transfer risk reserve ....................0
Loans and leases, net of unearned income and allowances .......................7,823,966
Assets held in trading accounts ........................................................1,739,144
Premises and fixed assets ................................................................531,098
Other real estate owned ........................................................................0
Investments in unconsolidated subsidiaries ...................................................603
Customers' liability to this bank on acceptances outstanding .............................125,222
Intangible assets ........................................................................236,931
Other assets ...........................................................................1,468,218
----------
Total assets ..........................................................................50,196,389
==========
LIABILITIES
Deposits:
In domestic offices ..........................................................10,235,475
Noninterest-bearing ...............7,515,809
Interest-bearing ..................2,719,666
In foreign offices and Edge subsidiary .......................................21,827,096
Noninterest-bearing ..................47,540
Interest-bearing .................21,779,556
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ..........................................11,976,613
Demand notes issued to the U.S. Treasury..................................................431,057
Trading liabilities............................................................1,250,459
Other borrowed money .....................................................................180,568
Subordinated notes and debentures ..............................................................0
Bank's liability on acceptances executed and outstanding .................................125,222
Other liabilities ......................................................................1,313,563
Total liabilities .....................................................................47,340,053
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ..................................................0
Common stock ..............................................................................29,931
Surplus .................................................................................492,756
Undivided profits and capital reserves/Net unrealized holding gains (losses) ...........2,373,416
Net unrealized holding gains (losses) on available-for-sale securities .(35,467)
Cumulative foreign currency translation adjustments ......................................(4,300)
Total equity capital ...................................................................2,856,336
----------
Total liabilities and equity capital ..................................................50,196,389
==========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
